Willis Re, the reinsurance arm of global insurance brokerage Willis Towers Watson, has noted a divergent and late January renewal season which saw some considerable price increases in certain lines of business.
Overall, Willis Re states that reinsurers have 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.
In light of this, the reinsurance broker states that the Jan 1st renewal season has concluded later than in previous years.
Discussing the first reinsurance renewal period of 2020, James Kent, Global Chief Executive Officer (CEO) of Willis Re, highlighted some considerable price increases.
“Other than retro aggregate, some treaty aggregate covers, and liability placements viewed as inadequately priced, most buyers have been able to secure the capacity they require, albeit at considerably increased prices in some of the stressed classes of business. Reinsurers’ client-centric underwriting meant preferred clients achieved their renewal requirements for pricing and conditions more straightforwardly than others.
“An understandable outcome of this has been a wide variance in the quoting process, which increased the challenge in establishing market clearing prices,” said Kent.
Willis Re notes that in general, U.S. placements were more challenging than international placements, with the exception of UK motor and also some international liability accounts. Property catastrophe proved less demanding than non-catastrophe business, notes the broker.
In particular, notes Willis Re, renewal negotiations were demanding on liability accounts with prior-year loss development and also on risk programmes with increased frequency and/or severity.
At the same time, pro-rata liability renewals were less volatile than excess of loss placements, which the firm says is mainly a result of price trends in the primary market in an increasing number of classes and regions moving upwards.
Significant rate increases and programme restructuring was seen in the retrocession space, driven by a capacity shortage in the sector in light of a shorter supply of alternative, or insurance-linked securities (ILS) capacity growth over the last 12 months. The reinsurance broker notes that the impact here has been felt more acutely on aggregate collateralised retrocession contracts, collateralised quota share/sidecars and lower level pillared accounts.
Despite this, a small number of ILS funds have shown organic capital growth and Willis Re states that this could see these funds gain access to new retro and specialty business at better pricing, alongside some traditional reinsurer capacity. Generally, occurrence retro renewals were more straightforward and in particular for clients who have consistent long-term counterparty relationships.
A late, divergent renewal season at the start of 2020 had been somewhat expected across the reinsurance industry, and it will be interesting to see how buyers and sellers performed in what remains a competitive and challenging landscape.