Retro pricing mismatch to be major challenge
Rates on loss-hit catastrophe retro accounts surged as much as 30 percent at 1 January, according to Willis Re.
Loss-free cat retro accounts in the non-marine sector recorded increases of 5-15 percent, while rates on loss-hit risk business were up 10-25 percent. Loss-free risk accounts also saw increases of up to 15 percent.
"Concerns of a capacity crunch were quickly dismissed as the insurance-linked securities market reloaded and the traditional market responded with an increased appetite," Willis Re said.
The broker said reinsurers preferred to maintain similar attachment levels and take advantage of "more money" for the same risk. Losses, past experience and overall trading relationships in recent years also influenced individual cedants' outcomes at renewal.
However, questions remain over how long the disparity between retro rates and underlying reinsurance pricing will continue. Who will "break first" remains the key issue for 2018, Willis Re said.
Other specialty lines also experienced double-digit rate increases. Signs of firming are now becoming apparent in the aerospace sector, after reinsurers managed to secure rate rises of up to 10 percent on loss-hit business.
These increases were mitigated by the generally positive performance of almost all general excess-of-loss programmes over the last decade, Willis Re said.
The general view across direct and reinsurance aerospace markets was that no further reductions would be available, and this position was largely followed, albeit "arguably more rigorously" by the reinsurance market than direct carriers, according to the broker.
Retrocessional aerospace pricing also stabilised with modest rate increases in the region of 5 percent.
Meanwhile, the US medical excess market secured rate increases of as much as 50 percent on loss-hit accounts, and up to 10 percent for loss-free business.
There has been continued increases in both the severity and frequency of large medical claims, Willis Re said, noting that specialty pharmaceuticals in particular were a growing concern.