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January renewals show ‘healthy’ but ‘bifurcated’ market: Guy Carpenter


1 January renewals reflected a healthy but evolving market as reinsurers adjusted their risk appetites and pricing thresholds for certain sectors in response to ongoing challenges, according to Guy Carpenter’s latest report.

In its annual market commentary recapping the 1 January reinsurance renewals, the broker said that placements were “ultimately orderly” after terms were issued and market participants traded through the “dynamic” environment.

Commenting on the renewals, Guy Carpenter chairman David Priebe said: “The reinsurance market is evaluating a broad spectrum of forces, including climate change, cyber threats, core inflation, social inflation and the continued evolution of frequency and severity of catastrophe losses.”

“While reinsurers reassessed underwriting strategies, resulting in a late and varied price discovery process, outcomes were successful, and Guy Carpenter was able to support its clients in what has proved to be a very dynamic marketplace,” he added.

The renewal process was later than normal in some sectors, including property, which lagged up to 14 days behind the typical January placement timeline. In addition, Guy Carpenter noted that its global property catastrophe rate-on-line index increased 10.8%, its biggest increase since 2006.

The report also said that reinsurers’ views of risk and individual placement characteristics continued to differentiate, with conditions being bifurcated between non-loss-impacted and loss-impacted programmes.

Capacity was ample across most lines, Guy Carpenter said, although it was more constrained tor retrocessional and frequency-exposed property, as well as cyber aggregate programmes. Capacity was also more constrained on lower layers, property aggregate treaties and per-risk deals, particularly those that were loss impacted.

On the global casualty front, portfolio performance and underlying rate movement were critical factors at renewals.

With dust still settling on the January reinsurance renewals, it is clear in many cases that pricing, terms and conditions across both US-based property and casualty deals improved for reinsurers, but sources told this publication that underwriters have still come away disappointed that gains in property weren’t greater, and improvements in long-tail lines largely center on better underlying portfolio performance.

Sources indicated that the property renewal lived up to predictions that it would be tough, with new and loss-hit programmes needing extra effort to source capacity, whether in the form of private deals and amended structures or by tightening coverage terms and conditions.

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