The market continues to be driven by the abundance of both traditional and alternative reinsurance capital rushing in to fill the massive Q3 insured losses, but uncertainty over the final impact of the record loss quarter remains, JLT Re's Global Head of Analytics, David FLANDRO said commenting on the January 1st renewals.

FLANDRO said that "while supply and demand dynamics initially tightened in business lines with heavy losses, pressures were offset by post-HIM capital deployments through channels such as new collateralised vehicles, post-event funds, new catastrophe bond issuances and increased stamp capacity and pre-emptions. Investors responded to opportunities in both the reinsurance and retrocession markets, resulting in the replenishment of a significant portion of lost capacity in time for renewals."

The JLT Re analytics expert added that although capacity levels are plentiful across most lines of business, and the bulk of 2017 losses were within modelled expectations, uncertainty over the ultimate cost to reinsurers and ILS investors during renewals remains. "This uncertainty was compounded by the recent wildfires in California. Any significant changes to loss expectations in the coming months could potentially affect pricing," FLANDRO added.

2017 was the first year since 2008 in which dedicated reinsurance capital declined, having fallen by roughly USD 15 billion in the second half of 2017, however, the JLT Re analytics expert explained that reinsurance capital remains at about USD 45 billion or 17% above gross premiums.

Looking ahead, FLANDRO said the reaction of traditional carriers and capital markets to future reserve development and loss experience will be important in shaping the reinsurance market this year.