Global reinsurance broker JLT Re has said that a lack of clarity surrounding both pricing adequacy and loss development is likely to fuel pressure through 2019, against a backdrop of muted pricing actions following consecutive years of increased catastrophe losses for the industry.
JLT Re, the reinsurance arm of global broker JLT Group, has commented on the January 1st 2019 renewals. Ultimately, the broker warns that two years of increased losses is testing carriers’ capital resilience as well as the appetite of alternative reinsurance capital.
The broker states that a lack of clarity remains around loss development and pricing adequacy in the space, a trend it expects to persist in 2019, although this is anticipated to be somewhat offset by the sector’s strong capitalisation.
Executive Chairman and Interim Global Chief Executive Officer (CEO), Ross Howard, said: “The 1 January renewal provides an early glimpse into how the reinsurance market is likely to develop in 2019. Whilst the property market continues to garner the headlines, changing dynamics in the casualty space are shaping up to be a prominent feature of the year.
“After years of largely favourable conditions that included a benign inflationary environment and historically low loss experiences, increasing claims severity, social inflation and instances of adverse reserve development are now hurting carriers and point to a market in transition.”
The January renewal season has been described by some as disappointing, with post-event rate hikes not living up to expectations, despite a notable slowdown in the entry of third-party capital. JLT Re notes a myriad of competing factors that are currently constraining pricing movements in many lines of business.
Market conditions are tightening as reduced appetite and increased demand for reinsurance protection is being observed for those lines that have suffered the more sizeable losses over the last two years, or where operational performance has fallen in recent times, notes JLT Re.
The broker’s Global Head of Analytics, David Flandro, said: “Such a backdrop, coming at a time of macroeconomic transition and capital market volatility, leaves the reinsurance market delicately poised as it enters 2019. With attention already focused on key renewals dates later in the year, it is crucially important for reinsurance buyers to have detailed insights into key market drivers.”