The January 1 renewals saw “ample capacity” for many lines, although reinsurers adjusted their risk appetite and pricing “for certain sectors in response to ongoing and emerging challenges,” according to a report from Guy Carpenter, the reinsurance business of Marsh McLennan.
Programs affected by loss or presenting greater risk to reinsurers experienced more protracted and challenging renewals, but the majority of reinsurance placements were orderly, once cedents’ terms were issued, said the report titled “January 2022, Reinsurance Renewal – An Evolving Market Leads to Divergent Outcomes.”
“The changing nature of risk fundamentally influences reinsurers’ view of pricing and capacity allocations,” said Dean Klisura, president and CEO, Guy Carpenter, in a statement. “It is clear from the Jan. 1 renewals that strategies are adjusting to account for these factors.”
The Guy Carpenter Global Property Catastrophe Rate-on-Line Index increased 10.8%.
Key findings of the report include:
- Reinsurers continued to expand their differentiation of each client’s unique placement characteristics, which include a view of underlying risk, loss experience, claims performance, strength of management, business strategy, perceived adequacy of pricing and structure, and depth of the client relationship.
- Conditions were bifurcated between non-loss-affected and loss-affected programs.
- The property renewal process ran up to 14 days behind typical timing, which created a flurry of activity with two weeks left in the year. Key drivers of the later renewal included shifting risk views affecting pricing models and capacity allocations, uncertainty around trapped capital/loss estimates and a very late retrocessional renewal.
- Property capacity was generally sufficient to complete programs, with more market appetite for non-loss-affected programs. Property capacity was more constrained on lower layers, aggregates, multi-year and per risk, particularly if loss impacted, as reinsurers reassessed risk appetite and inflationary impacts. Capacity for cyber aggregates was also limited.
- On the global casualty front, portfolio performance and underlying rate movement were critical factors at renewals. Casualty renewals were generally orderly, with pressure seen in several pockets, including cyber aggregate, clash and loss-affected excess-of-loss programs.
The report also revealed that the Guy Carpenter Global Reinsurance Composite Index is on track to deliver a combined ratio for 2021 of below 100% and a projected reinsurer return on equity of near 10%, even after accounting for more than US$100 billion of global large losses.
Source: Guy Carpenter
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