Advertise here, Reinsurance News

Menu

Reinsurance News

Retro market disruptions may impact future renewals: Willis Re

7th January 2019 - Author: Matt Sheehan

Disruptions and trapped collateral in the retrocession market may have an impact on first-tier reinsurance property catastrophe pricing levels over the upcoming 2019 renewals, according to broker Willis Re.

Reinsurance renewalsThe analysis came as part of the firm’s latest 1st View report, which found that reinsurance rates at the 1 January renewals were generally flat to slightly down.

The report noted that some insurance-linked securities (ILS) products, such as aggregate catastrophe and retro covers, have performed poorly for investors and resulted in less available capital.

Willis Re said that retrocession renewals would be particularly challenging this year due to a number of issues that impacted capacity, pricing and terms, with heavy Q4 wildfire and hurricane losses, as well as deterioration of Hurricane Irma and Typhoon Jebi, pushing the renewal later than usual.

Another year of trapped funds to cover development of 2018 losses has also impaired inflows of capital and capacity from ILS investors, resulting in a ‘capacity crunch’ in the final stages of the renewals, the broker claimed.

This was particularly true of aggregate contracts, where reinsurers pushed back with increase pricing, higher deductibles and tighter terms.

The report also suggested that some ILS funds may struggle to attract new investors in the short term due to their exposure to certain product types.

While Willis Re does not expect this trend to continue in the long term, it represents an evolution in the dynamic between traditional reinsurers and ILS markets and a further dislocation between underlying reinsurance pricing and retrocession pricing.

For example, the report found that, for loss-free aggregate layers where cedants have trapped collateral from ILS incumbents, prices were higher than for loss-impacted occurrence layers where the traditional reinsurers were the incumbents.

Willis Re claimed that dislocation in the ILS and retro markets contributed towards the lateness of the renewal season in the U.S, but had little impact on reinsurers’ capacity and pricing across Europe.

This is with the exception of Nordic countries, the broker added, where uncertainty around retro capacity and pricing led a few reinsurers to downsize or pull out, and in the UK, where some reinsurers are showing less flexibility where reliant on retro.

Recent Reinsurance News

Getting your daily reinsurance news from Reinsurance News is a simple way to receive only the reinsurance industry news that matters, delivered directly to your email inbox.

  • Only email is mandatory, but the more you tell us about yourself the better we can serve you in future!
  • This field is for validation purposes and should be left unchanged.

By submitting the form you are giving your consent to be emailed by us.

Read previous article:
Online re/insurance platforms could hurt competition, finds Geneva Association

While online re/insurance platforms entail many benefits with regard to market transparency, transaction costs and information asymmetries, they may also...

Close