An understanding in the reinsurance market that further rate enhancement is needed for protection will be “the backbone for discipline” as the sector moves towards mid-year renewals, according to Kevin O’Donnell, Chief Executive Officer (CEO) of RenaissanceRe Holdings (RenRe).
As expected, reinsurance rates increased at the January 1st, 2018 renewals season after years of declines, driven by the high level of catastrophe losses experienced in the third and fourth-quarter of 2017.
Speaking during the reinsurer’s fourth-quarter and full-year 2017 earnings call, RenRe’s CEO, Kevin O’Donnell, noted the rate improvements witnessed at 1/1, as well as offering some optimism for continued rate momentum in the year ahead.
RenRe saw rate increases averaging between 10% – 25% in loss-affected retro, with non-loss affected programmes being flat to up 10%. Loss-affected U.S. catastrophe business saw rates increase by 10% – 20%, while rates on other U.S. cat business were flat to up by 5%. Other property saw rate improvements of 5% – 10%, and rates in the international market were flat to up by 5%.
“Rates needed to go up and they did. It is our hope that the market continues to move closer to a suitable long-term equilibrium with rates neither to high nor too low,” said O’Donnell.
The CEO said that while he doesn’t mean to indicate that he believes mid-year renewals will be better than what was witnessed at 1/1, but that he feels the “momentum for a positive rate and more economics coming to reinsurers will persist as we go into those renewals.”
He explained that one of the reasons he believes rate increases will persist through 2018 is that there’s a lot of loss-affected business that is yet to be renewed, for both the June and July 2018 renewals, as well as a significant segment of the firm’s book that is multi-year.
He continued to explain how some part of that has renewed, but numerous parts that suffered losses haven’t been touched. This, combined with the fact the marketplace has experienced rate declines for some time now, underlines a need for rate enhancements.
“So, I think the overall discipline in the market recognising that more rate is needed for reinsurance protections’ is going to be a backbone for discipline as we approach the midyear renewals,” said O’Donnell.
Adding; “I am proud of our performance in 2017 and optimistic regarding our opportunities in 2018. Rates have mostly halted their decline across their segments and are trending in a positive direction.”
Looking forward into 2018, O’Donnell said that “rather than facing strong headwinds of the last few years, we will have the breeze at our backs for the first time in a long time.”
