The market expects a “correction” on the property catastrophe side for upcoming reinsurance renewals including for Japanese risk at 1 April and Florida-focused renewals in June and July of this year, the incoming Scor Global P&C CEO said.
Speaking at the Insider US conference in New York today, Scor’s Jean-Paul Conoscente said that following a relatively flat 1 January renewal, reinsurers “remain more optimistic” about price increases in the upcoming discussions.
“Everybody is being more disciplined,” he said.
In Japan in particular, Conoscente said he remains confident that loss-affected programmes will receive double-digit increases.
While the big four European reinsurers achieved “significant growth” at 1 January, they largely achieved only flat to 1 percent increases, he noted.
One reason they failed to achieve rate was that many of the accounts renewing at 1 January were not loss affected, as they focused on European cedants or regional US insurers.
The effect of trapped capital in retrocession markets occurred too late to have a significant effect on the underwriting, Conoscente said.
Another factor in more moderate price increases was a reaction to the prior-year renewals.
Following large losses in 2017, a number of reinsurers tried to push price increases worldwide across several lines of business.
“They were actually reduced on programmes, sometimes significantly reduced, and the programmes got placed without them,” he said.
“This time around, reinsurers had a more prudent approach,” at 1 January, he added.
He noted that price increases have been more targeted.
On the casualty side, there were corrections at 1 January for non-performing programmes that had commission reductions on a quota-share basis.
“This trend will continue throughout the year,” he said.
The reinsurance market is adjusting to conditions that have led to elevated catastrophe loss experience, not just from traditional perils such as hurricanes and earthquakes, but also from severe storms, winter weather and wildfires.
In particular, the executive pointed to the pattern of significant winter precipitation in California followed by longer than typical periods of drought.
This leads to vegetation acting as “fuel” to wildfires when it dries out, with the longer duration of drought leading to a higher probability of loss.
He pointed to Oregon, Colorado, western Canada, Australia, Portugal and western Asia as areas where similar conditions and elevated fire risks can be found.
Conoscente replaces Victor Peignet as Scor Global P&C CEO on 1 April, moving from the role of head of reinsurance.