Willis Re: Reinsurance Markets Diverge at January 1 Renewal Period

Reinsurers have been judicious during the 1.1 renewal period, leading to significant pricing and capacity variance depending on geography, product line, loss record, and individual client relationships. As a result, the renewal season has concluded later than in previous years, according to the latest 1st View renewals report from Willis Re, the reinsurance division of Willis Towers Watson, a leading global advisory, broking and solutions company.

Source: Willis Re | Published on January 2, 2020

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In general, U.S. placements were more challenging than international renewals, with U.K. motor and some international liability accounts being the exceptions to the rule, while property catastrophe (cat) proved less demanding than non-cat business. Renewal negotiations were particularly demanding on liability accounts showing prior-year loss development and on risk programs with increased loss frequency and/or severity. Pro-rata liability renewals were less volatile than excess of loss renewals, mainly as a result of primary pricing trends in a growing number of classes and territories moving upwards, with the increase in pricing accelerating in the second half of 2019.

Capacity for retrocessional covers has been in shorter supply after Insurance-Linked Securities (ILS) capacity growth stalled in the last 12 months and in some cases reduced, leading to significant rate increases and programme restructuring. The impact has been felt most acutely on aggregate collateralised retrocession contracts, collateralised quota share/sidecars and lower level pillared products. However, a small number of ILS funds showed organic capital growth and could therefore gain access to new retrocessional and specialty business at improved prices, along with some traditional reinsurer capacity. Occurrence retrocessional renewals were generally more straightforward, particularly for clients who have consistent long-term counterparty relationships.

James Kent, Global CEO of Willis Re, said: “Other than retro aggregate, some treaty aggregate covers, and liability placements viewed as inadequately priced, most buyers have been able to secure the capacity they require, albeit at considerably increased prices in some of the stressed classes of business. Reinsurers’ client-centric underwriting meant preferred clients achieved their renewal requirements for pricing and conditions more straightforwardly than others. An understandable outcome of this has been a wide variance in the quoting process, which increased the challenge in establishing market clearing prices.”

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