The recent January 1 reinsurance renewals ultimately succeeded in meeting demand for coverage despite changes in pricing and structures, and with negotiations running down to the wire, Gallagher Re’s James Vickers has maintained.
Gallagher Re’s 1st View report described 1/1 as “complex and in many cases frustrating” for both buyers and sellers of capacity as reinsurers sought to restrict cover.
But speaking to Reinsurance News, Vickers noted that the markets were relatively calm outside of property lines, and, even here, business was eventually renewed at terms both sides could agree to.
“We knew that US nat cat and the whole political violence, terrorism war areas were going to be difficult,” Vickers told Reinsurance News. “What we didn’t know and we were disappointed by was how late the renewal was.”
“I suppose in retrospect, when the market begins to change and turns to the extent it did, it’s not easy to find the market clearing pricing. But this renewal season has been bruising and everything has been very much compressed into the last couple of weeks, which is not particularly healthy.”
Vickers observed that even for some renewals that concluded relatively early, companies had to come back and reprice the business due to reinsurers stalling amid the confusion.
“Too many reinsurers were hanging back because they didn’t know what was going to happen,” Vickers explained. “They weren’t sure about their own retrocession positions, and had less confidence in their own pricing metrics.”
And in conjunction with this, he noted that some opportunistic reinsurers also delayed proceeds further by holding off negotiations until a later stage when their capacity would potentially be in demand at a higher price.
“That stalled things quite considerably,” Vickers granted, but added: “That aside once everything began to get going, basically everything has just about got done, albeit at much higher prices, and with different structures. And in some cases with reductions in coverage.”
“But what I think is also important to realize is that a lot of the renewals were relatively smooth,” he concluded. “The casualty markets and the motor markets are quite calm.”
Analysis by Gallagher Re shows that some catastrophe loss-hit treaties in the US witnessed rate increases of more than 100% at the January renewals, as Hurricane Ian, other catastrophe and risk losses, inflation, and rising interest rates drove disruption in the market.
However, the broker also warned that these hard-fought positive outcomes for reinsurers may have come at the expense of damaged client relationships, and may also have “reduced confidence from some buyers in the reinsurance product.”