April renewals see modest property catastrophe rate rises: Gallagher Re

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Property catastrophe treaty reinsurance rates saw modest, single digit increases, similar to those seen at the 1/1 renewals, as the April 1st reinsurance renewal season passed in a largely orderly manner, broker Gallagher Re has said this morning.

april-1-japan-reinsurance-renewalIn the main, appetite for buying reinsurance protection was relatively stable at the April renewal season, with no significant surprises.

Reinsurance broker Gallagher Re said in its latest report this morning that, the largely stable capacity requirements of reinsurance buyers did not outstrip reinsurers’ collective appetite for writing new risk at April 1st, across the majority of lines of business.

Pricing trends were generally a continuation of those seen in January, with loss-free property catastrophe treaty reinsurance rates showing modest single digit increases, on a risk-adjusted basis, Gallagher Re explained.

Conversely, property per-risk business showed a far wider range of rate increases, which was also aligned with the price environment at 1/1, while casualty rates were seen to be flat.

Gallagher Re highlighted that inflation was a cause of discussion at the renewals and that once again there was a focus on terms and conditions.

Reinsurers have been trying to assess the impact of inflation on cedent portfolios, so that they can then reflect it in their pricing models.

Clarity of coverage was also a focus, especially in retrocession, with markets keen to ensure there is no repeat of unexpected coverage of risks occurring due to the crisis in Ukraine.

“This move is part of an ongoing wider post-Covid trend among reinsurers to push for greater clarity of coverage,” Gallagher Re said.

On the insurance-linked securities (ILS) market, Gallagher Re said that activity in collateralised reinsurance and sidecars remained “relatively stagnant” at the April 2022 renewals.

Contrasting with this muted collateralised reinsurance and sidecar market, catastrophe bonds “built on record-setting issuance last year”, Gallagher Re highlighted.

Importantly, the appetite to expand the ILS market continues, with Gallagher Re noting that, “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, commented on the April renewal market dynamics, “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.”

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