James Vickers, Chairman International, Reinsurance, at Gallagher Re, has maintained that reinsurers’ appetite to write what they perceive to be attractive business has proved to be “absolutely undiminished” following the January 1st renewals this year.
Gallagher Re’s 1st View report noted that the 1/1 reinsurance renewals concluded with a “wide range of outcomes” as a push for improved pricing resulted in a tense round of negotiations.
Most reinsurers were determined to seek further price increases at 1/1 after hopes of a more profitable 2021 were dashed by another year of heavy catastrophe losses, which led to tense negotiations and ultimately a late renewal.
“It was a very, very late renewal, much later than normal,” Vickers told Reinsurance News during a discussion of the 1st View report.
“The reason for that was reinsurers were showing a much greater determination to try and squeeze out better terms from the market,” he explained.
“And it was quite interesting because, in a number of cases, senior management were much more heavily involved in the actual underwriting of individual deals. Because they were really determined to address areas where they saw poor performing classes of business, territories or clients.”
This proved to be a beneficial dynamic for buyers who were able to differentiate themselves, and reinforces an ongoing trend across reinsurance towards smaller markets with smaller cycles.
“That’s good for clients, because nobody likes to just be hit with a blanket rate increase,” Vickers noted.
However, he added that, despite being largely defined by a push for rate increases, the reinsurance renewals also saw reinsurers seek to grow their business in areas that have seen continued improvement for a number of cycles now, such as non-catastrophe, specialty and casualty lines.
That said, ceding companies have also recognised improvements in their portfolio, which has proved problematic for reinsurers as some carriers have looked to reduce the amount they cede or have asked for bigger commissions.
“That has squeezed some of that business,” Vickers acknowledged. “But reinsurers’ appetite to write what they perceive to be attractive business is absolutely undiminished.”
Overall, Gallagher Re believes these factors have resulted in a divergence in the market between certain lines of business in certain territories where reinsurers are keen to write new business, and areas where they’re not currently happy with the renewal terms.
“They don’t think the rate improvement is enough and they don’t wish to increase their exposures,” Vickers told Reinsurance News.
“So they’ve been renewing their written lines and a lot of the over-placements have fallen away in those areas. And the contracts are just getting done. But they are getting done, which I think is the important thing.”