A two-track trend has been especially evident in property catastrophe renewals, where cedants with good loss records and a disciplined, early renewal process achieved risk-adjusted rate reductions, while loss impacted accounts and clients viewed as of lesser quality are seeing upward pricing across several lines.
The insurance-linked securities (ILS) market faces a more comprehensive test in the absence of a major pricing uptick following significant loss erosion for some funds in both 2017 and 2018. Some funds are challenged in attracting new investors, and those with long-standing and successful track records, consistent and well-regarded management teams, and flexible trust language or fronting agreements are the ones best equipped for success.
Adjustments to business models initiated over the year have taken on an increased urgency, including the well-documented changes within the Lloyd's market. The upshot is that some primary lines are seeing significantly larger rate increases than treaty reinsurance business.
Reinsurers have benefited from increases in premium ceded by large carriers, notably through large new pro rata cessions where terms have slightly tilted in reinsurers' favor. At the same time, major reinsurers' strength and client-centric flexibility remain key to large cedants' goal of dampening earnings volatility.
James KENT, Global CEO, Willis Re, said: "In the immediate aftermath of the 2017 catastrophe losses, many observers felt the measured reaction of the reinsurance market was a clear sign of a changing structure and maturity. Others more cautiously suggested time was needed to properly assess the impact of 2017 events. In the wake of the high loss activity during the second half of 2018, early renewal negotiations have proved prudent, while pricing in the primary market has given reinsurers some cause for optimism in light of the increased pro rata cessions from clients."
Read the full version of the Willis Re 1st View January 2019: Contrasting Realities report.