London:
International reinsurance renewals completed for 1 April 2021 followed trends set earlier in the season, as market pricing remained firm in virtually all classes and territories, according to the latest 1st View renewals report from Willis Re.
Capacity was adequate across the board, and no substantive changes took place in negotiations over exclusionary language, said the report
Despite above-average insured natural catastrophe losses in 2020, most property catastrophe excess of loss programs renewing at 1 April delivered a largely loss-free year. Some property per-risk programs were impacted by the worsening frequency and severity of non-catastrophe losses, which led to pricing increases and program restructuring.
Aggregate covers particularly saw greater focus on structure than on price, as reinsurers worked to distance these accounts from attritional losses. Long-tail lines, and particularly casualty excess of loss, faced increased pricing pressure from reinsurers coping with low investment returns.
Pandemic and silent cyber exclusionary language followed the approach set at 1 January, through a combination of standard clauses and, from some reinsurers, customised language written to align with original policy wordings.
Demand from insurance-linked securities (ILS) investors proved strong, particularly for capacity made available through publicly traded bonds, which helped to moderate overall price increases.
James Kent, Global CEO of Willis Re, said: “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.”
Suez Canal crisis likely to add to upward pressure on marine reinsurance rates
The blockage of the Suez Canal is likely to lead to large reinsurance claims, adding to upward pressure on marine reinsurance rates, James Vickers, chair of reinsurance broker Willis Re International, told Reuters.
Formal investigations began this week into how the giant container ship Ever Given ran aground in the canal, shutting down shipping in the major global waterway for almost a week.
The incident and its impact on hundreds of ships delayed in the canal would be a “large loss” for insurance market Lloyd’s of London, its chairman Bruce Carnegie-Brown said this week, while Fitch Ratings said global reinsurers were likely to face hundreds of millions of euros of claims.
Vickers also said reinsurance losses were “not going to be a small amount of money.” The blockage was the latest in a growing number of man-made disasters leading to reinsurance losses, on top of a list of natural catastrophes in the past year, he said.
Reinsurers help insurers cover claims for major events such as hurricanes, in return for part of the premium. Reinsurers typically raise rates after they experience large losses.
Even before the Suez incident, the marine market “didn’t need much encouragement to keep going in an upward direction,” Vickers said.
Global marine reinsurance rates were generally seeing “high single digit” percentage point increases, Willis Re said in its April reinsurance renewals report on Thursday.
Marine reinsurance premiums have been rising for the past few years after several years of falling rates, as Lloyd’s of London and other firms have cut back on loss-making lines, reducing competition. The COVID-19 pandemic has also put upward pressure on reinsurance rates across the board.