Across multiple global specialty lines, a modest hardening of rates is expected in 2018, however, new capacity has entered the market in anticipation of the hardening market and will thus reduce the impact on rate growth, according to Willis Re’s viewpoint report on January renewals.
In the global specialty markets signs of market hardening have appeared following the Q3 catastrophe losses as well as increased interest in stop-loss reinsurance to address silent cyber.
With losses from the three major Q3 hurricanes still being tallied, January 1st 2018 renewals were later than usual.
The report highlights a trend of silent cyber becoming an increasing concern after NotPetya – reinsurers are responding by attempting to quantify potential cyber aggregation levels.
The cyber market shows a trend of growing interest in stop-loss reinsurance to address silent cyber; on a standalone basis, quota share remains the dominant form of reinsurance, however, the international and London markets have shown increased interest in excess of loss solutions.
A further factor expected to drive European cyber market demand is the forthcoming General Data Protection Regulation (EU) and similar regulations, however U.S. business still predominates.
Marine and aerospace lines have shown signs of market hardening, while direct market terms and conditions are lagging the hardening of the engineering reinsurance market.
In the marine space, Willis Re said the new Joint Excess Loss Committee (JELC) wording is a major talking point as clients analyze the changes, while poor performing pro rata contracts have put pressure on commission levels.
Trade credit lines have seen an increased tendency towards multi-year programmes; reinsurers have an increased appetite for longer tenors due to “potential large losses from Steinhoff accounting issues and Seadrill bankruptcy,” and Willis Re noted a further trend of increased interest from export credit agencies in portfolio risk transfers to the private reinsurance market.
“The general view across re/insurance markets was that “no further reductions in pricing would be available; this was a position was largely followed, arguably more rigorously by the reinsurance market than the direct market where some degree of further rate reduction was available, especially for better performing accounts and where further passenger and fleet growth was evident; conversely certain less well performing direct airline and aerospace accounts were subject to significant pricing increases,” explained Willis Re.
The onset of 2018 has brought trends of a modest hardening of direct terms across multiple global specialty markets, despite some growth in proportional reinsurance capacity.