Broker Willis Re has reported that market pricing has remained firm in virtually all classes and territories at the April 1 reinsurance renewals, despite there being no shortage of capacity.
According to Willis Re’s 1st View report on the April renewal period, conditions very much continued in line with what was seen at the earlier January renewals.
This included no substantive changes in negotiations over exclusionary language for cyber and pandemic, which utilised a combination of standard clauses and, from some reinsurers, customised language written to align with original policy wordings.
Despite above-average insured natural catastrophe losses in 2020, analysts noted that most property catastrophe excess of loss programs renewing at 1 April delivered a largely loss-free year.
However, some property per-risk programs were impacted by the worsening frequency and severity of non-catastrophe losses, which led to pricing increases and program restructuring.
Aggregate covers particularly saw greater focus on structure than on price, Willis Re reported, as reinsurers worked to distance these accounts from attritional losses.
Meanwhile, long-tail lines, and casualty excess of loss in particular, faced increased pricing pressure from reinsurers coping with low investment returns.
Willis Re also observed that demand from insurance-linked securities (ILS) investors proved strong, particularly for capacity made available through publicly traded bonds, which helped to moderate overall price increases.
“The market landscape has not seen much change since 1 January and consequently the important 1 April renewals saw more of the same between reinsurers and their customers,” said James Kent, Global CEO of Willis Re.
“Market results for 2020 illustrate the challenges faced by the global reinsurance sector of reduced investment income, declining prior-year reserve releases, rising COVID-19 loss reserving, and increased volatility in the frequency and severity both of natural catastrophes and man-made losses,” he explained.
“However reinsurers’ 2020 results, when adjusted for COVID-19 claims reserves, have shown encouraging improvements in underlying combined ratios and buyers’ immediate concerns over capacity availability and pricing have been allayed leading to an orderly renewal.”