Reinsurer appetite remained strong in certain European markets at the January 1st, 2020 renewals season, while the participation of insurance-linked securities (ILS) funds was limited, according to Willis Re, the reinsurance broking arm of Willis Towers Watson (WTW).
Willis Re’s commentary on the Jan 1st 2020 European reinsurance renewals highlights some divergent trends as regions and lines reacted to market dynamics in what remains a competitive operating landscape.
Starting with the UK, Willis Re notes that pricing was broadly flat on a risk-adjusted basis, with some reductions witnessed across the market following the benign catastrophe loss experience in 2019. While the loss experience in the UK was benign, recent international natural catastrophe losses combined with higher retro costs and a number of cat model adjustments, led to greater divergence in reinsurer views this year, says Willis Re.
In France, Willis Re notes that property cat excess of loss continued to experience risk-adjusted reductions and that although several per risk treaties have been hit, reinsurers’ appetite remained strong in this part of the marketplace. The reinsurance broker also notes that in France, as in other European markets, the participation of ILS funds at the renewals was limited.
This was also the case in Italy, Germany, Central & Eastern Europe and also Nordic countries, which all witnessed limited participation from ILS funds as pricing was viewed as challenging, even on a fronted basis.
Across Central & Eastern Europe, catastrophe placements continue with downward pricing trend, but the broker notes that reinsurers were more disciplined when compared with previous years.
In Germany, Willis Re highlights elevated buyer demand for per event and aggregate reinsurance capacity and while most German programs witnessed another loss free nat cat year, some renewals were impacted by the severe hailstorm which hit Munich in the month of June. During the Jan 1st reinsurance renewals, reinsurance firms continued to seek out German short-tail business for diversification purposes, while new market players offered additional reinsurance capacity.
Across Italy, the catastrophe renewals drove the overall property and casualty placement trends, with the key driver of renewals being non-peak / non-modelled perils. An increase in underlying exposures saw buyers in the Italian market look to purchase greater capacity, which helped some smaller reinsurers increase their market share as larger players showed some discipline and a lack of flexibility, says Willis Re.
In the Netherlands, a lack of large cat losses in 2019 saw clients push for reductions, but the reinsurance broker notes that sellers were not always willing to offer the reductions sought.
Nordic countries also experienced another benign catastrophe loss year in 2019, and combined with the benign cat loss experience witnessed in the region since 2013, helped to drive a continuation of high demand for Nordic property reinsurance.
In Austria, says Willis Re, significant snow pressure losses in 2019 affected the lower layers of several catastrophe programmes, while appetite for Austrian cat business remained similar to previous years.
Overall, the Jan 1st 2020 reinsurance renewals have been described as late and divergent. The decline of ILS has been highlighted also, with reports suggesting that alternative sources of reinsurance and retrocessional capital contracted by as much as 7%.
