The firm’s Global Rate on Line (RoL) Index, which measures the change in catastrophe premium paid year-on-year, increased just 1.1% following the renewals despite consecutive years of major catastrophe losses.
This included increases of 2.6% in the U.S and decreases of 2.5% in Europe, Middle East & Africa (EMEA), although there was a wide degree of variation within these results depending on account specifics.
For some European renewals, the uncertainty around Brexit affected their willingness to use Lloyd’s capacity, but this had little effect on renewal outcomes as additional capital was available.
Guy Carpenter noted that, while Japan also experienced significant catastrophe loss activity, the impact on rates will not become clear until the April 1 renewals conclude.
It is worth noting the Guy Carpenter’s pricing index varies somewhat with reports from other analysts, such as JLT, who claimed that property catastrophe reinsurance rates had declined by -1.2% following the January renewals.
Analysts at Guy Carpenter also argued that the effects on profitability from losses in the property sector put pressure on other lines to achieve or maintain self-sustaining levels.
This resulted in rate increases on both loss-impacted business and on some non-loss-impacted casualty and specialty business.
“While the impact on January 1 renewals overall was muted, this was a more challenging environment for some segments than it was a year ago,” said David Priebe, Vice Chairman at Guy Carpenter.
“The industry is dealing with questions of pricing adequacy and where and to what degree adjustments might be needed,” he added. “Finding equilibrium was not always easy and questions remain coming out of this renewal.”
Guy Carpenter suggested that retrocessional renewals at January 1 had been impacted by uncertainty over the amount of available convergence capital, although it is unclear what this might mean for the broader market going forward.
Deployable capacity may become further constrained if the trend of catastrophe losses continues or capital providers become more cautious in their investments, although analysts noted that there are also signs that capital may increase, with several initiatives working to bring in new funds.
Further uncertainty is added by the potential effects of climate change on the market’s exposure to loss, as well as emerging risks such as cyber, which the potential to exceed even current exposures, Guy Carpenter said.
Accordingly, market participants may need to adapt their approach to this shifting landscape, but the broker expects capacity to remain plentiful for risks that can be adequately measured and priced.