The majority of protection buyers started their April 1st reinsurance renewal negotiations well in advance, which, in light of the challenges driven by the COVID-19 pandemic proved to be a prescient approach, according to James Kent, global Chief Executive Officer (CEO) of Willis Re.
As noted by reinsurance brokerage Willis Re at the time, the divergent January 1 reinsurance renewals concluded later than in previous years. And, in an effort to avoid this happening again buyers were eager to begin renewal negotiations well in advance of April 1st.
According to Kent, “This organized approach proved to be prescient in light of the COVID-19 outbreak, which started to challenge the operational model of the market in the last two weeks of March.”
Willis Re, the reinsurance broking arm of Willis Towers Watson, today released its latest 1st View report for the Japan-focused April reinsurance renewals. Overall, the report notes price increases of as much as +50% for loss-affected lines such as Japanese wind, while loss-free accounts experienced more moderate improvements.
Alongside an exploration of rate movements by both business line and geography, this edition of the 1st View report also discusses the impacts of the ongoing COVID-19 pandemic, which as noted by Kent, has started to have an impact on the reinsurance sector.
Varied degrees of lockdown have been applied in many countries around the world to try and stop the spread of the virus, a move which has resulted in millions of people and entire businesses working remotely. The reinsurance industry’s immediate response to this change has been one of resilience, notes Kent, with the process and completion of renewals being timely and undisrupted.
During the renewals, Kent notes that programmes which firm ordered in good time were fully placed ahead of the due date and were completed absent any specific COVID-19 exclusionary language.
“For those programs that were not completed well in advance, several reinsurers sought to impose COVID-19 exclusions; in some cases, reinsurers achieved these exclusions, but in other cases, buyers have been able to provide comfort that their original polices have no exposure to COVID-19-related losses by issuing letters of understanding to reinsurers,” explains Kent.
The impact of COVID-19 on the insurance and reinsurance sector remains uncertain. While potentially sizeable losses are expected in areas such as event cancellation and travel, any potential losses in business interruption lines are constantly being debated and reinsurers will be eager to mitigate their exposures where possible and avoid any unexpected losses.
“The extreme gyrations of financial markets have had a significant impact on the assets of reinsurance companies, but fortunately the timing of the COVID-19 disruption has coincided with the global reinsurance market being in a very strong financial position supported by strict regulation,” explains Kent.
He concludes that the global reinsurance space is well positioned to show its ability to manage the longer-term financial challenge created by the pandemic, while at the same time continue to provide support to both primary market players and their policyholders.