Despite the ongoing impact of COVID-19, reinsurers have largely halted the persistent downward trends which characterised recent years, according to a new report from Willis Re.
On the buying side, Willis Re states that the efficient working of the global reinsurance market ensured that terms and conditions have been less of a problem than initially feared.
Capital levels recovered rapidly during the year, ending 3% higher than at year-end 2019. Willis Re says this was enabled by improving investment markets, retained earnings and newly raised capital.
In casualty lines, negotiations of pro-rata treaties were reportedly more buyer friendly as a result of underlying rates increasing consistently and significantly.
In some cases buyers balanced demands for reductions in ceding commissions by opting to increase net retentions of risks that they now believe are adequately priced.
Willis Re says incumbent reinsurers faced competition from carriers deploying fresh capital, but the continuing and worsening low-interest-rate environment and social inflation impacted pricing on all excess of loss long-tail lines.
Property retrocession capacity remained limited, but not to the extent many expected, particularly as some ILS funds increased their Assets Under Management, traditional reinsurers offered new or additional limit, and some buyers sought to acquire less cover.
Emerging COVID-19 losses are reported to have triggered technical discussions of primary policy coverage and reinsurance treaty wordings.
With both remaining in the early stages of deliberation, Willis Re says most programmes renewed without considering any potential COVID-19 losses, leaving time for more measured discussions and subsequent adjustments.
In the interim, reinsurers have been unwilling, with few exceptions, to accept ongoing Contagious Disease exposures.
“2020 brought vast economic and social disruption to many parts of society. It is important to recognise our good fortune as being part of an industry that continues to grow in relevance, and which has the potential to adapt to meet such challenges,” said James Kent, Global Chief Executive Officer of Willis Re.
“This was reflected during the renewals process, as the resilience of the reinsurance sector shone through, not just to losses, but to working challenges. Once again, the dynamics of the sector have proved robust on all fronts.”