Property reinsurance renews at “lower end of expected increases” – GC

At the January 2021 reinsurance renewals, property rate increases were seen to be at the lower end of expectations, while property retrocession rates also didn’t firm as much as anticipated, broker Guy Carpenter has confirmed.

Despite the push for broad reinsurance market hardening at the renewals, as we’d been explaining in our coverage as the renewals approached, an element of disappointment was always likely to be experienced by reinsurers and ILS markets as new capital looked set to dampen rates.

As we reported yesterday, broker Howden said that property catastrophe reinsurance rates were up by around 6%, while non-marine property retrocession was up by around 13%.

Both of those figures are far below where most markets would have pegged the average increase earlier in the renewal negotiations and Guy Carpenter’s analysis of the renewals reflects this.

Reinsurance broker Guy Carpenter explained that, for property reinsurance renewals, “Pricing generally settled at the lower end of expected increases outside of more constrained segments at January 1.”

This wasn’t always the case, as markets continued to differentiate and any reinsurance programs that had been loss impacted, particularly if their retentions were perceived to be too low, saw markets hold firmer on pricing or structure adjustments, the broker said.

The property reinsurance renewals saw ample capacity, including from new market entrants, while on the other side of the equation the demand for limit was relatively stable, with just a few pockets of increases, Guy Carpenter explained.

Guy Carpenter saw non-loss impacted programs settle with risk-adjusted pricing up from the mid-single digits to low teens in the United States, or low-single digits in the EMEA and Asia-Pacific regions.

While lower than had been anticipated, it’s important to note that these are now significantly improved from a few years ago and the fact Europe and Asia saw reinsurance rate increases is a positive and could herald greater stability in rates moving forwards.

The broker also commented on the property retrocession renewals, where disappointment was also seen.

“Rate movements on non-loss-impacted programs were not as robust as many anticipated and continued to moderate closer to January 1,” Guy Carpenter said.

Also saying that, “Additional capacity in the retrocession market, lower limits bought by some global companies and increased activity in the catastrophe bond market all helped to moderate some of the upward pressures in this section of the market.”

We explained a lot of these dynamics in an earlier piece on the retrocession market, where we detailed some of the capital sources that served to dampen rate increase potential.

Despite the disappointment, many will be satisfied with how the return potential of their property reinsurance and retro portfolios has increased at the January 2021 renewals.

Now, it is a matter of seeing whether discipline holds and how renewal rates move at the April and June/July renewal seasons later this year.

Read all of our reinsurance renewals coverage here.