Almost all buyers were able to secure the capacity they desired at June 1 and July 1, but differentiation between cedants by reinsurers has increased, particularly based on the accuracy of their previous catastrophe loss estimates. Superior pricing and capacity were available to clients seen as preferred trading partners.
Non-marine retrocession coverage saw the greatest price increases of up to 35% for loss-hit programs, while loss-hit Florida and U.S.-nationwide property catastrophe and per-risk exposures saw prices rise by up to 25%. However, ‘market-standard’ price increases have been displaced by reinsurers’ more discerning approach, creating a wide pricing disparity between different accounts.
In casualty lines, pro rata treaty commissions typically declined, notwithstanding improvements in the underlying terms and conditions for most classes, although the same dynamic of superior pricing for the better performing companies was seen in casualty lines too. Worsening loss ratios and declining reserve redundancy across a number of lines point to the need for continued momentum to ensure sustainable returns.
James Kent, Global CEO of Willis Re, said, “Recent smaller catastrophe losses from perils that are less well modeled allied to continued loss creep from larger events are challenging parts of the market, and causing some reinsurers to revisit their underwriting models. This was most notable in the Florida renewals, where pricing took an upward direction, particularly for cedants seeking new limit.”
Kent added, “Retrocession buyers have also felt the impact of the market’s changing appetite, putting the business models of some buyers under scrutiny as ILS capacity in particular has pulled back — and boosting the opportunity for traditional reinsurance carriers who are less reliant on retrocession capacity. Overall it remains a functional and logical reinsurance market with preferred pricing and capacity for cedants viewed as superior partners.”
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