The upcoming mid-year reinsurance renewals are likely to produce similar results to the recent Japan April 1st renewals, underpinned by respectable but uninspiring increases owing to an abundance of available capital in the market, according to analysts at JMP.
Analysts highlight disappointing rate improvements at the January 1st 2019 renewals, followed by improved but less than expected increases at the April renewals, which saw much of the loss-affected Japan business up for renewal.
Following two years of significant catastrophe losses, JMP says that property cat pricing is to remain a key focus for investors, adding that it remains to be seen exactly what happens to rates at the mid-year, U.S. focused renewals.
Reinsurers will be hoping for more meaningful and sustainable rate improvements at the upcoming renewals season, but analysts warn that the high hopes of some might not be met, suggesting further disappointment for market participants.
“It remains to be seen how the cards will fall, but we believe results could be similar to Japan – respectable increases, but failing to reach lofty expectations – as there remains significant supply of capital in the market,” warn analysts.
Despite a notable slowdown, the growing presence of alternative, or third-party reinsurance capital continues to contribute to the market’s supply / demand imbalance, both supplementing and competing with traditional capacity in a very challenging operating landscape.
Subsequently, the reinsurance market remains well capitalised, and unless more capital can be utilised to address both underserved existing risks and emerging risks, in both mature and developing markets, capacity supply is likely to continue to outweigh market demand.
“Also, we think that there will be increased differentiation taking place amongst reinsurers with respect to which cedants they support, which will likely lead to increased dispersion around the mean and a wide range of outcomes more so based on each insurer’s individual results/exposures that broader market supply/demand dynamics,” say analysts.