Reinsurance prices rise after tough negotiations

Reinsurance prices have increased following a January renewals period that featured protracted negotiations and stronger gains for portfolios affected by losses.

Howden Group says talks took place after more than $US100 billion ($142.8 billion) in insured catastrophe losses last year, a level breached in real terms for only the fourth time on record, and amid the themes of climate change and a rise of secondary or non-peak perils.

“The prevalence of such events in 2021, including winter storm Uri, the European floods and the tornado outbreak in the US late in the year, reinforced carriers’ concerns around price adequacy and catastrophe model efficacy,” it says.

“With the increased volatility of secondary events more closely associated with climate change, this will be an area of continued market focus and action in 2022.”

Howden’s Global Property-Catastrophe Risk-Adjusted Rate-on-Line Index rose 9% at January 1, compared to 6% last year, marking the biggest year-on-year increase since 2009.

“Given the higher weighting of European programs up for renewal at 1 January, loss experience in the region was a key inflating factor,” it says.

Gallagher Re’s First View report says the season has “on balance” delivered another rational outcome, with a wide range of outcomes highly differentiated by client, portfolio and territory.

Australian property renewals featured increased reinsurer discussion on inflation and the impact on pricing, with continued limited appetite for aggregate and lower layers exposed to frequency losses.

Some buyers increased retentions to mitigate reinsurance spending, but Gallagher Re says there were no material changes to wordings or conditions.

Australian property rates rose 10-25% for catastrophe loss-hit risks and 5-10% for catastrophe loss free.

In casualty, following several quarters of rate increases the Australian renewals featured ongoing but reduced upward pressure.

Guy Carpenter says market conditions were divided between non-loss and loss impacted programs, with those impacting by loss or presenting greater risk to reinsurers experiencing more protracted and challenging renewals.

The renewal process was later than normal in some sectors including property, lagging up to 14 days behind typical timings for the period, it says.

The Guy Carpenter Global Property Catastrophe Rate-on-Line Index increased 10.8%.