As anticipated, the April 1st 2021 reinsurance renewals followed the trends set earlier in the year, with pricing generally firm despite adequate capacity levels, according to the latest 1st View report from broker Willis Re.
The April reinsurance renewals were ‘orderly” according to the reinsurance broker and seemingly buyers were able to secure the protection they needed at pricing and terms that were not considered overly onerous, despite further year-on-year increases.
As a result, Willis Re said that the 1/1 renewals in January “set the scene” for April and so the continuation of trends was not unexpected.
While, “market pricing remains firm in virtually all classes and territories,” according to James Kent, Global CEO of Willis Re, he also explained that momentum has added to that seen in January for reinsurers, which will also apply to insurance-linked securities (ILS) funds.
“Although rate increases in some areas were lower than reinsurers were targeting, the upward direction in rate has led to solid improvements across reinsurers’ portfolios,” Kent explained.
Property catastrophe excess of loss programs had shown better results in 2020, than in other recent years, which assisted in negotiations. But still these key areas of the April renewals for the ILS fund market saw increases.
Japanese earthquake programs and towers saw +2.5% to +5% increases, despite being catastrophe loss free, while Japanese wind and flood exposed risks and programs saw increases of +5% to +20% depending on catastrophe impacts experienced, Willis Re estimates in its report.
Property risks in Japan saw higher rises, with risk loss free up +5% to +10% and risk loss hit seeing a further steep rise of +25% to +40%.
Meanwhile, in a bellwether for the upcoming mid-year reinsurance renewals, United States nationwide programs that renewed in April saw changes from being flat to +15% for risk and catastrophe loss hit accounts.
Overall, Japanese reinsurance rates are now estimated to be back at levels last seen in 2012 or 2013, according to Willis Re’s report, while the United States still has some way to go but is climbing in the right direction still.
Alongside pricing increases, there was also an element of program restructuring at the April renewal.
Aggregate reinsurance covers continued to see more of a focus on structure than on price, as reinsurers and ILS funds continue to look to avoid attritional losses.
James Kent, Global CEO of Willis Re, commented on the renewals saying, “The market landscape has not seen much change since 1 January and consequently the important 1 April renewals saw more of the same between reinsurers and their customers.
“Market results for 2020 illustrate the challenges faced by the global reinsurance sector of reduced investment income, declining prior-year reserve releases, rising COVID-19 loss reserving, and increased volatility in the frequency and severity both of natural catastrophes and man-made losses.
“However reinsurers’ 2020 results, when adjusted for COVID-19 claims reserves, have shown encouraging improvements in underlying combined ratios and buyers’ immediate concerns over capacity availability and pricing have been allayed leading to an orderly renewal.”