Speaking on a panel at the PwC Insurance Summit in Bermuda in November, Kevin O’Donnell, President, and CEO of RenaissanceRe (RenRe), underlined that the industry is heading into a “strong” and “constructive” reinsurance rate environment ahead of the January renewals.
During the panel, O’Donnell was asked how long inflation is going to be a significant driver in the rise of reinsurance prices.
“We think obviously it’s a bigger issue for casualty. So, let’s look at social inflation or legislative abuse, neither term probably works. And I think it’s difficult to forecast,” O’Donnell said.
He continued, “I think right now most lines of business have a rate above trend.
“But over a 10-year period, if you look at what has occurred, there still needs to be more rate to make that 10-year return adequate because prior to 2019, there’s probably going to be some tensions in the loss curves that are not fully recognised yet.”
“So, I think that we’re going to be in a very strong, constructive environment for rating. I think reinsurers are in a very good position where we are playing quite a critical role in helping companies catch up to where they need to be. With that, there might be some opportunity for us to improve terms like ceding commissions as well,” O’Donnell explained.
Discussing the outlook for the January renewals, O’Donnell noted he anticipates that the different lines of business will have divergent behaviours.
He observed, “I think it’s going to be a good renewal. I think it’ll be less of a shock to the market than last year was. There’ll be new demand coming in the property cat market. There was a demand that was not put to the market last year because the rate increases were beyond the share of wallet that they could bring to buy the new layer.
“Property cat will have more demand coming in, and that’s always accretive for pricing. Some of the other property lines will be also a good rating environment, and then there’s a lot of discussion as to where casualty is going. I think casualty primary rates will continue to move up.”
O’Donnell concluded, “From a reinsurance perspective, there might be some room to improve terms and conditions within the casualty portfolios as well.”
