Reinsurance rate increases continued for most major lines and territories during the 1.6 and 1.7 renewal period, however, in many cases reinsurers had to accept firm order terms below their initial quotes. That indicates that the market is approaching equilibrium, according to the latest 1st View renewals report from ICMIF Supporting Member Willis Re.
Reinsurers’ good Q1 results, generally low catastrophe losses, rising underlying reinsured premium volumes, positive investment trends, and the strong economic recovery from COVID-19-related economic pressures together moderated rate increases, despite reinsurers’ best efforts to maintain pricing momentum, says the report. Capacity overall remained more than sufficient to meet demand, but reinsurers resisted the temptation to compete for top-line revenue, so capacity for poorly performing classes was constrained.
According to the report, concerns over inflation and COVID-19 relates loss developments had no impact on pricing with flat or modestly rising rates for property renewals. Casualty risks saw less consistent changes to pricing and coverage, although the overall gentle upwards trend was similar. An exception was ceding commissions, which responded more directly to changes in the underlying rates and terms & conditions.
Momentum continued in the catastrophe bond market, which saw around USD 6 billion of new issues in the second quarter of 2021, outstripping all new cat bond capacity issued in 2019. Significant investment inflows have narrowed margins and encouraged new cat-bond cedants.
James Kent, Global CEO of Willis Re, said: “The global reinsurance market is moving towards an equilibrium. Reinsurers, backed by resilient investors delivering an increasing capital base, are robust and well positioned to provide the long-term support their clients expect and need. These clients recognise the value of a stable and broad reinsurance marketplace, so have continued to grant rate increases in most instances. However, we are approaching the top of a cycle which we believe is unlikely to precede a precipitous and damaging decline in rates. Instead, the market is likely to retain its discipline in order to maintain the balance it has achieved over the past couple of years especially with the full picture of losses from COVID-19 and prior year liability lines still to emerge.”
Download the full report: The Willis Re 1st View report is a thrice-yearly publication including specific commentary on key trends throughout the world’s major reinsurance classes and regions.