Some reinsurance buyers took advantage of favourable terms and conditions (T&C) and the efficient wealth of reinsurance capacity at the key January 1st 2017 renewals, resulting in an increased demand for protection in more developed regions, according to Aon Benfield.
As expected, the softening reinsurance environment persisted into 2017 and industry players witnessed further rate declines, albeit it moderated, across the majority of business lines and geographies at the 1/1 2017 renewals.
Overall, says Aon Benfield in its January 2017 Reinsurance Market Outlook report, demand for reinsurance protection increased, although growth wasn’t felt across the entire industry and was isolated to a few regions and business lines.
Favourable T&C and the abundance of efficient traditional, and alternative reinsurance capacity available at the recent renewal season saw a continuation of the buyers market that has been evident in the global reinsurance industry for some time now.
As a result of market conditions, and also evolving regulatory requirements and changing rating agency thresholds, some insurers in the U.S. and Europe took steps to secure additional property catastrophe coverage, says Aon Benfield.
At the same time growth in new, emerging business lines such as cyber and mortgage also continued, notes the brokerage.
However, the increased demand for reinsurance protection failed to occur in emerging markets, with Aon Benfield highlighting that slow insurance growth in parts of the world with low insurance penetration, meant that reinsurance demand remained relatively stable.
“Beyond demand increases, insurers in a number of global regions also looked to increase the proportion of protection provided on a multi-year basis as reinsurers in turn looked to lock in participations,” explains Aon Benfield.
Looking forward to renewals later in 2017, Aon Benfield notes that the merger and acquisition (M&A) activity seen in the fourth-quarter of 2016, combined with the potential for interest rates increases, could “signal potential capacity restrictions.”
“Our expectation is that these impacts will be slow to manifest and enough excess capital remains in the market to continue the trend for better terms and conditions for insurers seen at January 2017,” concludes Aon Benfield.