Reinsurance renewal rates fluctuated sharply in the January 1 renewals, with catastrophic losses and a limited retrocessional reinsurance market leading to higher property prices while the claims rate rose in a narrower range. Risks were difficult investments, said brokers and insurers.
"We have had to remain very selective," said Wilton, Connecticut-based Christopher Buse, chief underwriting officer, reinsurance, North America, at Axa XL, a unit of Axa SA . – The economy is still tough. Underlying pricing has risen, but interest rates are low and inflation is very high. "
" This was not an easy renewal, "said Mike Van Slooten, head of business information for Aon PLC's reinsurance solutions division in London. very difficult to subtract a single data point from what just happened. There is a huge variety of outcomes. ”
The differences in quotes and opinions from reinsurance companies were" much greater than we have seen in previous years, "said David Priebe, Norwalk, Connecticut-based chairman of Guy Carpenter & Co. LLC.
Guy Carpenter's global property disaster index increased by 1
Real estate reinsurance renewal. Interest rate hikes ranged from low to high double digits, while accident rates ranged from unchanged to 20% higher, said Gallagher Re, a unit of Arthur J. Gallagher & Co., in another report published last week.
"Reinsurers signaled quite early that they wanted higher prices and would offer less capacity in certain areas, but there was still some decal shock from real estate customers, says Nick Durant, New York-based CEO of North America for Lockton Re, a unit of Lockton Cos. LLC. "You would have to go back to January 1, 2002 to remember a renewal where there were such extreme views that were positive or negative about so many industries.
In the United States, storm losses, including Hurricane Ida, forest fires and winter storms, hit the insurance market
European weather events, including severe floods in Germany in July and Swiss hailstorms in June and July, caused significant losses and drove reinsurance prices higher in affected areas, causing peaks of more than 50% in markets that had been stable for years.
“The end results were very mixed by customer, by class, by territory. There were some unchanged renewals and in some emerging markets even the odd interest rate cut, says James Vickers, president of international reinsurance at Gallagher Re in London.
Mr Priebe said, partly driven by large property losses, pricing in the United States did not increase nearly as much as in Europe, where the market had remained unchanged for the past 10 years, he said.
low-level loss protection because they have not performed well and "this is the area where the problem of secondary hazards and claims has played out," said Mr. Vickers. themselves a little higher up. Low levels and total coverages were quite difficult to place. "
Non-catastrophic coverages, such as liability insurance for directors and officials and financial lines, where prices have" moved like a rocket ", are seen as very attractive to reinsurers, he said.
"In a market like this, you have many programs that have been restructured. It's not like you had the same contract that was renewed without any changes from year to year," said Van Slooten.
Inflation is starting to affect reinsurers' thinking for the first time, this year, said Mr Priebe of Guy Carpenter.
19659003] When pricing is determined, reinsurance companies must consider the extent to which Inflation will compensate for the increases, said Mr Buse of Axa XL.
The costs of redevelopment of properties have has risen due to high material prices and labor shortages, Van Slooten said. "Rebuilding costs after losses have increased quite significantly," and some reinsurance companies have "baked" this factor into their pricing. In addition, economic inflation creates uncertainty about pricing and reserve adequacy, he said.
Cyber reinsurance is still challenging, said Mr. Tough. "Interest rates are rising enormously because losses are rising enormously," he said. Demands for explicit coverage or exclusion of silent cyber are widespread, especially in Lloyd & # 39 ;s of London, said Mr. Buse.
"Getting coverage on an overall basis for cyber became increasingly challenging," said Mr. Priebe.
Retrocessional reinsurance market, which backs insurers and has become increasingly dependent on capital markets in recent years, was the area in the market that saw the most capacity withdrawn, said Mr. Priebe. "Capital support total coverage in the retro market decreased quite significantly," he said.
Disaster bonds have performed extremely well, says Mr. Vickers from Gallagher Re. But retrocession-protected compensation certainly "struggled because that product has performed poorly over the past three to four years," he said. The resulting reduction in compensation coverage squeezed the capacity of the retrocessional market.
Aons Mr. Van Slooten said that the record level for disaster bond placement was driven by rising reinsurance prices. "Record issuance of cat bonds tells of the state of the reinsurance market. One reason cat bonds have proven so popular is that traditional reinsurance prices are going up," he said. 2022.
"All eyes will be on Florida and other locations by the middle of the year to see if reinsurers continue to drive price increases," he said. to return to the market and hope that the number of serious incidents in 2021 will not be repeated in the meantime. "