Analysts at RBC Capital Markets have maintained that the January 1 reinsurance renewals were “in-line” with expectations, despite reports that pricing increases were more muted than many had hoped.
“In all our time looking at and working in the sector, we cannot think of a time when the January reinsurance renewals have exceeded all expectations,” RBC analysts noted.
They pointed to other renewals in recent years, such as June 2018, when Florida rates barely moved even after the costliest year on record for catastrophe losses.
“Times have moved on, and to an extent, poor profitability since has led the industry (both traditional and alternative) to a position where it must charge more for its capacity,” RBC went on, adding that this will likely be the case throughout 2021.
Prices increased for the fourth year in a row, and in the majority of cases accelerated from the 2020 increases.
Data shows that property catastrophe prices may have increased by up to 6% globally, while the average property rate increase for loss free business was up 4% and 12% for loss impacted business overall.
“Rates in 2021 increased almost across the board; this was the case for both loss affected business but more positively also for non-loss affected business which suggests to us, a real repricing of risk,” RBC explained.
With only small 2021/22 improvements in margins factored in the European reinsurers combined ratios, analysts therefore believe the 1/1 renewals at least meet market expectations.
“Traditionally pricing cycles have overshot both on the downside but also on the upside,” RBC continued. “It remains too early to tell whether or not the 2021 onwards pricing environment will lead back to a far stronger era of profitability.”
The European reinsurers will report their renewals from early February onwards, with Hannover Re the first up on 4th February.
This reporting will likely be more important in determining whether the renewals met expectations rather than focusing on narrower property catastrophe rate changes, which only make up small parts of the European reinsurers portfolios.
