Reinsurance moves up to 20% at July renewal. January to be fragmented: Hyperion

At the July 1st reinsurance renewals rates were seen to improve by as much as 20% according to Hyperion X, a little behind the average 26.2% rate improvements seen by the company at the June 1st renewals.

Data from Hyperion X Analytics, a data analytics focused unit of the global Hyperion Insurance Group holding company that is also parent to RKH Reinsurance Brokers, had shown that property catastrophe reinsurance rates-on-line rose by an estimated 26% at the June 1st 2020 renewal season.

But for the July 1st renewals, were more U.S. nationwide and international programs renew, the rate movements while still positive were not of the same magnitude.

Speaking to analysts at Morgan Stanley, David Flandro from Hyperion X and Nick Griffiths from RKH Reinsurance Brokers, explained that the more differentiated nature of the July renewals, with a wider territorial scope across the US, Latin America, Australia and Europe meant the average rate movement was much lower.

Retrocession rates were seen to rise more sharply, with “sizeable” increases and leaving buyers to ponder the acceptability (perhaps affordability) of retrocession at this time.

This leaves reinsurance carriers with few options really, aside from to look at their own exposures and moderate their appetites.

Reshaping of portfolios, lifting of deductibles, and a shift to proportional agreements are all ways carriers can reduce the costs of their retrocession.

Hyperion X also said it is seeing increased demand for capital relief solutions at this time, as reinsurance and retro pricing continues to rise.

The executives also noted a decrease in availability of alternative capital from the ILS marketplace, as well as reduced multi-year deals.

Capital is expected to continue to flow into reinsurance related start-ups through the rest of the year, as new entrants and investors look to benefit from attractive pricing.

Finally, the executives noted that positive rates may continue to be seen into the January 2021 reinsurance renewals, but the dynamics of the market may be more fragmented.

Capacity available may not be very different, but selective deployment by reinsurance and retro carriers and markets could result in fragmentation.

The executives noted that for lower reinsurance layers pricing may not move that much at January 2021, but that for higher layers in certain reinsurance and retro programs there could be rate increases of up to ~40% being seen.