Analysts at Gallagher Re have reported that Lloyd’s and the London Market experienced more stable conditions than were seen last year during the January 1, 2022 renewals, despite being generally quite late to market.
In its 1st View report on the critical renewal period, Gallagher Re observed “mixed outcomes” for both reinsurers and cedants, as a push for improved pricing resulted in a tense round of negotiations.
For Lloyd’s and the London Market specifically, reinsurers voiced concerns over inflationary fears, both economic and social, however there was abundant capacity and ultimately reinsurer pricing moved from ‘aspirational’ to a more rational outcome.
Given the desire to reflect the strong underlying rating environment, as well as their capital structure, Gallagher Re reported that excess of loss remains the dominant product of choice for Lloyd’s and London Market buyers.
Excess of loss reinsurers differentiated between loss affected and non-loss affected programmes, focusing on achieving a small improvement in terms in the face of adverse loss development whilst seeking to preserve their position on the best performing accounts with renewal pricing ranging from flat to a modest risk adjusted rate decrease.
Gallagher Re noted that some buyers have sought to manage spend of their excess of loss structures with increased use of annual aggregate deductibles, and there has also been widespread re-structuring of excess of loss programmes at renewal, primarily in order to re-balance the key areas of risk transfer.
Contract wordings also came under intense scrutiny, with buyers looking to extract broader treaty coverage to get better value from their reinsurance spend.
Last year’s focus from reinsurers on managing accumulations from Covid-19 in the wake of the pandemic has this year been replaced by extended discussions on affirmative and non-affirmative cyber, analysts added, with buyers requiring treaty protection that is back-to-back with their underwriting approach to cyber exposures in the direct market.
In a post Covid-19 world, Gallagher Re continues to see casualty catastrophe reinsurance as an active area of interest for buyers seeking to manage their unknown accumulation risk, particularly in the face of an uncertain economic environment and growing cyber concerns.
According to the broker, casualty cat capacity remains available, especially where potential sources of aggregation can be clearly articulated, however pricing is a function of perceived exposure and available capacity and has therefore not directly benefitted from original rate improvements.