In general, the longstanding underlying issues of rate inadequacy continued to fuel measured rate adjustments in many classes and geographies, led by the U.S. treaty market. Double-digit risk-adjusted reinsurance price increases were seen for loss-hit catastrophe treaties and ranged from +10% to +20% for the programs of Australian and Latin American insurers, to as much as +35% in the Florida homeowner renewals. Rate increases were prevalent but much less dramatic for loss-free catastrophe treaties with limited peak catastrophe exposure.
For casualty business, excess of loss treaties with loss emergence saw rates rises. This was most noticeable for U.S. healthcare liability which saw increases by as much as +40%, but those long-tail lines of business with stable prior-year results renewed as expiring or with modest price increases. Pro-rata commissions were flat or reduced by up to 2.5 percentage points, largely driven by the extent of pricing changes on original policies.
Collectively reinsurers are recognising that COVID-19 losses, which currently are reported at about $7 billion, may take several years to settle which will spread out reserving over many quarters. Meanwhile the pandemic has driven a second realisation: the impacts of a pandemic loss on the asset and liability sides of the market’s balance sheet are highly correlated. As a result, investors have remained cautious and selective as they continue to withdraw capital from some ILS funds whilst favouring better performing funds and rated reinsurers.
James Kent, Global CEO of Willis Re, said: “The global reinsurance market was not capital-constrained during the recent renewals, but has shown a greater level of prudence with an increased focus on underwriting profitability. More persistent hardening is evident largely across the board, but reinsurers continue to exercise clear differentiation between clients, lines of business, and territories. The value of sustained relationships has once again been proved.”
Download the full report: The Willis Re 1st View report is a thrice-yearly publication including specific commentary on key trends throughout the world’s major reinsurance classes and regions.
About Willis Re
One of the world's leading reinsurance brokers, Willis Re is known for its world-class analytics capabilities, which it combines with its reinsurance expertise in a seamless, integrated offering that can help clients increase the value of their businesses. Willis Re serves the risk management and risk transfer needs of a diverse, global client base that includes all of the world's top insurance and reinsurance carriers as well as national catastrophe schemes in many countries around the world. The broker's global team of experts offers services and advice that can help clients make better reinsurance decisions and negotiate optimum terms. For more information, visit https://www.willistowerswatson.com/en-GB/Solutions/reinsurance