Despite the disruption caused by the ongoing COVID-19 pandemic, reinsurers took a measured approach to the April renewals and services were provided without interruption, reports reinsurance broker Willis Re in its latest 1st View renewals report.
According to Willis Re, the reinsurance broking arm of Willis Towers Watson, the global reinsurance industry smoothly transitioned to the new work-from-home model driven by efforts to mitigate the spread and impacts of the COVID-19 outbreak.
The April 1st renewals have a large focus on Japanese business and after the recent loss activity witnessed in the region, reinsurers witnessed significant rate increases on loss-affected accounts, with more modest improvements on loss-free lines of business, explains Willis Re.
Unsurprisingly, loss-affected catastrophe treaty contracts experienced the largest risk-adjusted property price increases at the renewal, of +30% to +50% for Japanese wind exposures. Willis Re notes that loss-free business saw less meaningful increases, with a small number renewing as expired.
At the same time, the influence of the insurance-linked securities (ILS), or alternative reinsurance capital market fell slightly at the April renewals, with Willis Re highlighting some examples of funds lowering their offer in light of investor redemptions.
During the first-quarter of 2020 and ahead of the April 1st renewals, the COVID-19 pandemic has worsened and resulted in the lockdown of numerous countries as the world attempts to reduce both the societal and financial impact of the outbreak.
Regarding the virus outbreak, Willis Re notes that reinsurers’ response was impacted by both timing and underlying coverage considerations.
Providing additional detail, the reinsurance broker notes that early firm orders were finalised without specific exclusionary language. However, in some instances, several reinsurers sought exemptions, which were achieved in some cases, while in others, protection buyers offered comfort through letters of understanding, which ultimately explained that underlying original policies have no exposure to COVID-19 losses.
James Kent, the global Chief Executive Officer (CEO) of Willis Re, commented: “Having demonstrated its ability to manage the operational challenges of COVID-19 so far, the global reinsurance industry is well placed to demonstrate its ability to manage the longer-term financial challenge and continue with its mission of providing support to primary insurance companies and their policyholders.”
After the significant losses caused by Japanese typhoons in recent years, coupled with an industry-wide recognition that more rate is needed across many parts of the reinsurance landscape, significant rate increases were expected for loss-affected accounts at the April renewals.
As highlighted by Willis Re, it appears that this has come to fruition and, at the same time, reinsurers look to have responded positively to the altered operating landscape being driven by the global pandemic.
Of course, it will take some time to understand just how much of a hit financially COVID-19 will be for the reinsurance sector, but it’s promising to hear that services have been continuing as normal and that companies took a measured approach to the April 1st reinsurance renewals.