Market likely to retain discipline and maintain balance

Reinsurance rate increases continued for most major lines and territories during the 1 June and 1 July renewal period; however, in many cases reinsurers had to accept firm order terms below their initial quotes, according to the latest 1st View renewals report from Willis Re, the reinsurance division of Willis Towers Watson.

That indicates that the market is approaching equilibrium, adds Willis Re.

Good 1Q performance

Reinsurers’ good 1Q results, generally low catastrophe losses, rising underlying reinsured premium volumes, positive investment trends, and the strong economic recovery from COVID-19-related economic pressures together moderated rate increases, despite reinsurers’ best efforts to maintain pricing momentum.

Capacity overall remained more than sufficient to meet demand, but reinsurers resisted the temptation to compete for top-line revenue, so capacity for poorly performing classes was constrained.

Concerns over inflation and COVID-19 related losses had no impact on pricing with flat or modestly rising rates for property renewals. Casualty risks saw less consistent changes to pricing and coverage, although the overall gentle upwards trend was similar. An exception was ceding commissions, which responded more directly to changes in the underlying rates and terms and conditions.

Momentum continued in the catastrophe bond market, which saw around $6bn of new issues in the second quarter of 2021, outstripping all new cat bond capacity issued in 2019. Significant investment inflows have narrowed margins and encouraged new cat-bond cedants.

Approaching equilibrium

Mr James Kent, Global CEO of Willis Re, said, “The global reinsurance market is moving towards an equilibrium. Reinsurers, backed by resilient investors delivering an increasing capital base, are robust and well-positioned to provide the long-term support their clients expect and need. These clients recognise the value of a stable and broad reinsurance marketplace, so have continued to grant rate increases in most instances.

“However, we are approaching the top of a cycle which we believe is unlikely to precede a precipitous and damaging decline in rates. Instead, the market is likely to retain its discipline in order to maintain the balance it has achieved over the past couple of years especially with the full picture of losses from COVID-19 and prior year liability lines still to emerge.”

Source: Asia Insurance Review