Willis Re, the reinsurance arm of global insurance brokerage Willis Towers Watson, has commented on the January 2020 renewals for the Lloyd’s and London reinsurance markets, highlighting a meaningful reduction in capacity.
Analysts at Willis Re said that this reduction in overall capacity had come as reinsurers scaled back casualty portfolios in the midst of prior year deterioration.
There was also some shift in appetite from excess of loss to pro rata as reinsurers sought to catch original rate improvement, they added.
Commenting on the reduction in casualty capacity, James Kent, Global CEO at Willis Re, said that it had been “compounded by Lloyd’s continued remedial action leading to a few syndicates not trading forward.”
“Furthermore, capacity for managing general agents (MGAs) and other similar structures requiring delegated underwriting authority, including funds at Lloyd’s capital, has been squeezed with client and risk selection paramount,” Kent explained.
Willis Re also believes that Lloyd’s remedial actions over recent years and the resulting reduction in capacity in some areas of the market are driving higher re/insurance pricing in some niche cases.
With some Lloyd’s syndicates going into run off and others taking firmer positions on rate increases, authorized capacity in the Lloyd’s and London markets decreased.
However, analysts noted that this decrease was replaced by new capital and a strong supply from existing markets.
Capacity for transactional liability (such as warranty and indemnity, tax, etc.) has similarly retracted considerably for 2020 given concerns of aggregation and price erosion.
Looking specifically at casualty business, Willis Re believes that pro-rate commission business renewal pricing was down -2% to flat, while loss from excess of loss business was flat to up 5%, and loss affected excess of loss casualty renewals at Lloyd’s were up 5% to 20%.
Willis Re previously highlighted a divergent and late January renewal season which saw some considerable price increases in certain lines of business.
Overall, it said that reinsurers had been judicial during the January 1st renewal season, resulting in significant pricing and capacity variance depending on geography, product, loss record and also individual client relationships.