Capacity at the recent US reinsurance renewals was still sufficient to meet demand, despite trapped ILS capital and a lack of retrocession availability, according to analysts at Willis Re.
The broker noted that cedants with growing portfolios benefited from headline reinsurance premium increases at the January 2020 renewals, which helped to alleviate risk-adjusted pricing pressure.
But in contrast, those with reducing portfolios found it harder to achieve commensurate pricing decreases.
Market clearing prices for smaller capacity programs were generally less than for those seeking to place significant limits, although minimum rates on line at the top end of catastrophe programs remained stable.
And while per risk pricing was largely driven by individual program performance, Willis Re believes that market proved harder than the catastrophe market, which continued to be driven adequate capacity.
Additionally, with some Lloyd’s syndicates going into run off and others taking firmer positions on rate increases, the London market authorized capacity decreased at the January renewals.
However, this decrease was replaced by new capital and a strong supply from existing markets, analysts said.
Regional cedants also continued to exhibit strong demand for aggregate covers despite pricing pressures due to loss experience.
Willis Re noted that in the fourth quarter of 2019, the cat bond market saw two repeat sponsors (USAA and CEA) seek ILS coverage for North American Property risks.
The firm suggested that these transactions revealed an underlying market hardening, with investors seemingly requiring a greater risk-adjusted margin relative to prior year issuances.
