Analysts at rating agency S&P global ratings have noted that reinsurers feel they haven’t fully benefitted from their results, despite the global reinsurance pricing gains from the January renewals.
Although this year’s renewal season started with high hopes, with many reinsurers having freshly raised capital, the price increases were below expectations, diminishing their hope of a strong start for 2021.
Although the reinsurance pricing trends are positive, it’s also the tightening terms and conditions that are important too, with an increased focus on communicable disease and silent cyber exclusions.
Reinsurers have noted that technical underwriting margins will be needed in order to make up for the shortfall in investment income, elevated natural catastrophe losses, and additional pandemic claims, which S&P believes will collectively carry the positive reinsurance pricing momentum throughout this year.
Overall, property and casualty reinsurance pricing has seen an increase during the past year and through this year’s January renewals, indicating a firming market, but not a hard one. Rate increases were lower than what reinsurers had hoped for.
As reinsurers pushed to improve terms and conditions, cedents responded by retaining more of their risk, because many of them believed that the primary insurance risk might have reached rate adequacy.
Overall, the much-anticipated 2021 January renewals didn’t deliver the significant rate increases reinsurers were hoping for. Rate increases were concentrated in loss-impacted lines of business that most needed it while loss-free lines rose less.
This comes as the global reinsurance sector faced another heavy catastrophe loss year in 2020, with the added burden of a global pandemic.