Analysts at JMP Securities expect property reinsurance pricing to remain firm as the market progresses through 2022, but warn that rates will not materially accelerate from current levels without additional significant loss events.
The recently completed January 1 renewal saw continued upward movement in pricing, with some business seeing the strongest increases in recent memory, JMP Securities notes.
However, it believes the renewals ultimately proved “disappointing for many reinsurers given that their view of risk-adjusted pricing suggests a much more status quo outcome despite record levels of catastrophe losses during 2021.
Areas of particular stress include lower layers and aggregate covers as reinsurers broadly seek to move away from frequency exposure given recent loss activity.
And reduced supply of capital in certain areas of the retro market is also having a trickle-down impact on certain reinsurers’ appetites.
Other noted by JMP Securities include a growing discrepancy in pricing between loss-impacted and clean accounts as well as an increased level of differentiation by reinsurers based on the perceived quality and underwriting discipline of the primary carrier.
In contrast, the casualty and specialty market largely experienced a smooth January 1 renewal, analysts added.
With the majority of the market being quota share, reinsurers have enjoyed the benefit of strong underlying pricing at the primary level on these lines, they observed.
And with projections in many cases calling for improving accident year loss ratios going forward, ceding commissions felt a small amount of upward pressure, which benefitted buyers.