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The Insurer In Full: 1.1 renewals – Willis Re vs Howden

The uncertainty around Covid-19 losses that clouded the run-up to 1 January looks set to...

...continue to hang over forthcoming renewal periods, with early broker analysis aligning with The Insurer’s prognosis last month that reinsurers had largely agreed to postpone the troublesome issue of pandemic business interruption losses until later this year.

Much of the focus at renewal was on underlying terms and conditions, with the need for agreeable exclusionary language around pandemic solutions at the forefront of this year’s renewal discussions for both property and longer-tail treaties.

Howden, the second broker to issue its preliminary 1 January renewals report this morning, largely echoed analysis from Willis Re earlier today which suggested that while rate increases have been achieved at 1 January, these were typically below the level expected in the run-up to the renewal period.

Despite this, reinsurers made some substantial gains in core classes at 1 January. Across property catastrophe and casualty lines, Howden reported average rate increases of around 6 percent.

For London market casualty, Howden said this represented the biggest increase for more than 15 years while the broker said the property catastrophe increase was the highest for a decade.

Both Howden and Willis Re have suggested retro rate increases at 1 January were in the low double-digit percentage range – confirming anecdotal evidence that the market softened its expectations in mid-December.

Howden’s analysis suggests retro increases of around 13 percent on average. While this was certainly below what some were predicting in early December, it still equates to a cumulative increase of more than 50 percent since 2017.

Willis Re said loss-free non-marine retro rates were up 5-15 percent, with increases of 10-20 percent for loss-affected covers.

Renewals broker analysis

The broker said capacity constraints envisaged earlier in the year had not materialised to the extent originally forecast.

The impact of Covid-19 on 2020 retro placements remains uncertain, and Willis Re said in the majority of cases the market is looking to address this topic at a later date. Instead, reinsurers and cedants focused on trading forward in 2021 as the priority.

According to Howden, this practice was echoed in other classes. While Covid-19 was a “weighty factor at renewal”, the broker said negotiations were generally conducted in an orderly fashion and noted that “some of the more outlandish industry loss predictions had lost authority by year end”.

Howden said property catastrophe reinsurance renewal rates were up 6 percent at 1 January, led by 6 percent increases in North America, which bore the brunt of 2020’s high frequency loss activity.

Willis Re said US property catastrophe placements saw increases of 5-15 percent for loss-free covers, with loss-hit placements up 10-25 percent.

Willis property rates

In Europe, Willis Re said the low level of regional catastrophe activity and the failure of Covid-19 losses to rise to previously forecasted levels helped keep rate increases below 5 percent. Although modest, this was still somewhat of a changing of the guard as European property cat has been stubbornly resistant to price increases for a decade. 

Casualty rate increases were tempered in part by additional capacity from both new and existing capital, Willis Re said, with reinsurers pushing for improvements in terms and conditions on longer-tail treaties faced with buyers’ increased confidence to retain more of their own portfolios.

Howden London Market Casualty Risk-Adjusted Reinsurance Rate-on-Line Index – 1992 to 2021

While Covid-19-related loss emergence in casualty lines has been limited to date, loss developments in 2021 will likely have a significant bearing on future renewal discussions.

Both Willis Re and Howden point to the potential for more measured discussions to take place over the next 12 months – in both property and casualty classes – as the industry struggles to get to grips with the issue.

This means the pandemic will likely have a significant bearing on negotiations in subsequent renewals, and will also likely prolong hard market conditions beyond 2021.

 

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