The January 1st 2022 reinsurance renewal season saw conditions that reflect a “healthy but bifurcated” reinsurance market, according to global broking firm Guy Carpenter.
The reinsurance market is evolving, Guy Carpenter says, evidenced by reinsurers adjusting their risk appetites and pricing thresholds for certain sectors, as they respond to ongoing and emerging challenges.
“The changing nature of risk fundamentally influences reinsurers’ view of pricing and capacity allocations,” explained Dean Klisura, President and CEO, Guy Carpenter. “It is clear from the January 1 renewals that strategies are adjusting to account for these factors. Cedents’ views, supported by portfolio data, will continue to drive renewal outcomes. This emerging reality further emphasizes the critical nature of our advisory role. We will continue working closely with our clients to help them manage this shifting environment effectively.”
David Priebe, Chairman, Guy Carpenter, added, “The reinsurance market is evaluating a broad spectrum of forces, including climate change, cyber threats, core inflation, social inflation, and the continued evolution of frequency and severity of catastrophe losses. While reinsurers reassessed underwriting strategies, resulting in a late and varied price discovery process, outcomes were successful, and Guy Carpenter was able to support its clients in what has proved to be a very dynamic marketplace.”
Ample capacity was seen to be available for most cedent needs and in the global property sector programs were completed, with greater market appetite evident for non-loss-impacted upper layers.
Capacity was more constrained for the lower layers of reinsurance towers, as well as aggregates, multi-year and per risk, particularly if loss impacted, Guy Carpenter said.
In the casualty market, portfolio performance and underlying rate movement were critical factors in cedents success at the renewals, the broker further explained.
Impressively, despite elevated catastrophe loss activity again, Guy Carpenter’s Global Reinsurance Composite Index remains on track to produce a combined ratio of below 100 percent for 2021.
This demonstrates the profitability in reinsurance, especially for firms that have avoided excess impact from structures such as aggregates this year.
Commenting on the renewal outcome, Guy Carpenter said they were “ultimately orderly once terms were issued and market participants effectively traded through the dynamic environment.”
Differentiation is accelerating though, it seems, with some reinsurers’ taking firmer views on cedent performance and their own risk appetite.
The bifurcation was most evident between non-loss-impacted and loss-impacted programs, the broker sayd.
Loss impacted experienced more protracted and challenging renewals, as reinsurers acknowledged the risks they can pose.
Depending on prices, capacity was ample across most lines, but notably more constrained for retrocessional and frequency-exposed property, plus cyber reinsurance aggregate programs.
As had been reported in the run-up, Guy Carpenter notes that the renewal process was later than normal in some sectors, including property, as much as 14 days behind typical timings for the period, the broker believes.
Finally, the Guy Carpenter Global Property Catastrophe Rate-on-Line Index increased 10.8 percent, with structure adjustments most widely seen in the loss impacted areas of the property reinsurance market.
