Reinsurers more discerning at mid-year renewals

Clients viewed as preferred trading partners receive superior pricing and capacity

Reinsurers more discerning at mid-year renewals

Insurance News

By Ryan Smith

Strengthening conditions in the primary insurance market drove improvements to reinsurance prices, terms and conditions at the June 01 and July 01 renewals, according to the latest “1st View” renewals report from Willis Re.

Almost all buyers were able to secure the capacity they wanted on June 01 and July 01, according to Willis Re. However, differentiation between cedants by reinsurers has increased, especially based on the accuracy of their previous catastrophe-loss estimates. Clients seen as preferred trading partners were offered superior pricing and capacity.

Non-marine retrocession coverage saw the greatest price hikes, with increases of up to 35% for loss-hit programs. Nationwide property catastrophe and per-risk exposures saw price hikes of up to 25%, according to Willis Re. “Market-standard” price increases have largely been replaced by reinsurers’ more discerning approach, resulting in a wide pricing disparity between different accounts.

In casualty lines, pro rata treaty commissions generally declined despite improvements in underlying terms and conditions for most classes. Worsening loss ratios and declining reserve redundancy highlighted the need for continued momentum to ensure sustainable returns, Willis Re said.

“Recent catastrophe losses from perils that are less well modeled allied to continued loss creep from larger events are challenging the market and causing some reinsurers to revisit their underwriting models,” said James Kent, global CEO of Willis Re. “This was most notable in the Florida renewals, where pricing took an upward direction, particularly for cedants seeking new limit. Retrocession buyers have also felt the impact of the market’s changing appetite, putting the business models of some buyers under scrutiny as ILS capacity in particular has pulled back – and boosting the opportunity for traditional reinsurance carriers who are less reliant on retrocession capacity. Overall it remains a functional and logical reinsurance market with preferred pricing and capacity for cedants viewed as superior partners.”


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