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Aligned expectations yield balanced 1 April reinsurance renewal: Gallagher Re 1st View

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Topics: Alternative Capital Casualty Political Risk & War Property - International Property - North America Rates

Reinsurance rates showed modest increases at 1.4 characterised by an orderly renewal season...

In general, buyers’ largely stable capacity requirements did not outstrip reinsurers’ collective appetite in most lines of business.  

Inflation was a key topic during every negotiation, as reinsurers sought to assess its impact on ceding companies’ portfolios to then be reflected in their pricing models. Buyers able to demonstrate that their own underwriting is taking into account inflationary impacts faced an easier renewal. Meanwhile, as conflict in Ukraine continued in the background of renewal discussions, the market standard Sanction Limitation & Exclusion Clause, LMA 3100, saw almost universal adoption. This move is part of an ongoing wider post-Covid trend among reinsurers to push for greater clarity of coverage. 

On a risk-adjusted basis, loss-free property catastrophe treaty rates showed modest single digit increases similar to those seen at the 1.1.2022 renewal. Property per risk business showed a far wider range of rate increases following the trend seen in other recent renewals. Casualty rates were flat.   

In the ILS markets, collateralised reinsurance and sidecars remained relatively stagnant. In contrast, cat bonds during Q1 2022 built on record-setting issuance last year. Weighted average risk premiums for US wind-exposed risks, for example, were up by 0.2 points to 6.7%, in line with a rise in expected loss to 3.0%. Interest in expanding the range of risks suitable for ILS investment is alive on both sides of the deal, with existing and new investors and cedants alike keen to pursue possibilities.

James Kent, Global CEO, Gallagher Re, said: “The 1.4 renewal was for the most part undramatic and orderly. Insurers who were able to show the quality of their underlying portfolios were rewarded with a favourable renewal terms. Capacity was not abundant, but nor was it insufficient. The equilibrium which has been building over the past 18 months appeared to arrive during this balanced renewal.” 

“That said, it wasn’t always straightforward. The ongoing supply-chain squeeze, the inevitable but still surprising return of inflation, and especially the challenges presented by Russia’s invasion of Ukraine were discussed at every major renewal negotiation. Fortunately, none of these topics prevented a basically orderly renewal from occurring, mainly in line with everyone’s expectations.”

Download the full report, here: https://www.ajg.com/gallagherre/news-and-insights/2022/april/view-balanced-renewal-april-2022/

 

The Gallagher Re 1st View report is a thrice-yearly publication including specific commentary on key trends throughout the world’s major reinsurance classes and regions.

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