Reinsurers have adopted a rational rating approach at the 1 April 2019 renewal with price increases of up to 25% targeted towards loss-affected contracts and programmes. These rate increases were balanced by flat renewals for loss-free classes and programmes, according to the latest 1st View renewals report released yesterday by Willis Re, the reinsurance division of Willis Towers Watson, a leading global advisory, broking and solutions company.
Continued high levels of market capitalisation both from traditional reinsurers and Insurance-linked securities (ILS) markets were the key to reinsurers’ rational pricing responses.
Some buyers sought to purchase greater capacity both on an aggregate or occurrence level and the market was able to respond with capacity being constrained only when price was an issue. Meanwhile, for many buyers, long-term relationships remained more important than the modest rate reductions offered in some non-catastrophe, loss-free classes. ILS markets remained a small but unchanged force in Japan, with some increase in appetite from a few funds in a handful of areas.
Willis Re global CEO James Kent said, “As the global reinsurance market looks to address the current supply demand imbalance, being able to demonstrate a stable and rational base plays an increasingly important role when developing and promoting solutions to new buyers and core clients”.
Highlights
In the aviation sector, the ongoing Ethiopian Airlines / Boeing 737 MAX Grounding Liability claim could potentially be the largest ever non-war claim the market has incurred. The claim could erode three to four years’ worth of reinsurers’ global excess of loss premium. Otherwise, the direct aviation markets have carried their momentum from the fourth quarter of 2018 into the new year.
Although there were few major renewals in the opening months of the year, premium rates have been increasing across all business lines. This trend is driven by M&A and some withdrawals in 2018 constricting market capacity, following several unprofitable years.
Cyber books continue to grow, and more standalone treaties come to market. As the original market continues to soften, some reinsurers have indicated a limited appetite for growth in this line.
Globally, accumulation and aggregation concerns (both within cyber and silent cyber) remain on everyone’s agenda leading to increased interest in clash and stop loss solutions. Meanwhile, pressure from regulators and those charged with market oversight has led to an improvement in reducing silent cyber exposure. There has also been a greater focus on clarifying definitions of war and cyber terrorism, together with associated exclusions and carve-backs.
India saw significant price increases on loss-affected NatCAT programmes, after the flood losses in Kerala, as some risk programmes suffered sizeable losses. GIC Re continued supporting proportional programmes but took strong measures to improve the pricing and underwriting on the underlying portfolios. Foreign reinsurers also showed optimism in supporting proportional programmes.
In Japan, Nat CAT pricing remained ‘orderly’, with reinsurer capacity staying stable. This despite the losses suffered through Typhoon Jebi. However, the typhoon did have an impact on the marine sector, which saw price increases in all loss-affected marine programmes.