As P&C premiums ceded as a percentage of gross premiums written come off cyclical lows JLT Re predicts the industry will see reinsurance demand continue to increase into 2018.
In its Viewpoint Winds of Change report, JLT Re noted that even before the series of heavy 2017 insured losses, the market was showing clear signs of changing reinsurance supply/demand dynamics with an uptick in strategic reinsurance purchasing leading to cession rate increases.
Now as the industry adjusts to the impact of record-level global third quarter losses, a continuation of this trend is expected.
However, with the continued oversupply of capital in the market, reinsurance pricing will remain highly competitive, regardless of any potential price increases seen next year.
JLT Re said cedents are likely to reassess their purchasing approaches by “strategically lowering retentions and optimising protection.
“Reinsurance has been a resilient and efficient source of contingent capital through several different market cycles and it continues to offer a strong value proposition today, especially as it is still often a more economical form of capital than debt or equity.
“This provides a positive backdrop for cedents as they will continue to have significant reinsurance support at historically low rates.”
Cedents with robust reinsurance programmes are best placed to navigate post-loss environments; with reduced earnings volatility they’re able to deploy capital rapidly to support clients and take advantage of any new business opportunities.
