Significant Differences Seen in January Reinsurance Renewals

For the January 1, 2020, reinsurance renewal period, Willis Re found significant pricing and capacity variance across reinsurers depending on geography, product line, loss record, and individual client relationships. As a result, the renewal season has concluded later than in previous years.

In general, Willis Re said US placements were more challenging than international renewals, with UK motor and some international liability accounts being the exceptions to the rule, while property catastrophe (cat) proved less demanding than non-cat business. Renewal negotiations were particularly demanding on liability accounts showing prior-year loss development and on risk programs with increased loss frequency and/or severity. Pro-rata liability renewals were less volatile than excess of loss renewals, mainly as a result of primary pricing trends in a growing number of classes and territories moving upwards, with the increase in pricing accelerating in the second half of 2019.

Capacity for retrocessional covers has been in shorter supply after insurance-linked securities (ILS) capacity growth stalled in the last 12 months, and in some cases, it reduced, leading to significant rate increases and program restructuring. The impact has been felt most acutely on aggregate collateralized retrocession contracts, collateralized quota share/sidecars, and lower-level pillared products. However, a small number of ILS funds showed organic capital growth and could, therefore, gain access to new retrocessional and specialty business at improved prices, along with some traditional reinsurer capacity. Occurrence retrocessional renewals were generally more straightforward, particularly for clients who have consistent long-term counterparty relationships.

James Kent, global CEO of Willis Re, said, "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."