Despite a particularly bruising January 2023 reinsurance renewal season that broker Gallagher Re calls tense and late, the market is reported to have resolved many of the issues holding up clearing and the renewals are largely complete.
“Largely complete” is the same terminology that rival reinsurance broker Guy Carpenter used on Friday, in its early analysis of the 1/1 2023 reinsurance renewals.
Gallagher Re, in publishing its latest 1st View renewals report, explained today that this has been a “complex and in many cases frustrating renewal process which has gone down to the wire.”
Market conditions have in some cases evolved rapidly through the renewal negotiations, and encouragingly Gallagher Re points to one of the main reinsurer motivations driving market conditions as being “the raising of the ‘floor’ on minimum rates on line.”
That’s good to hear. We had explained last week the need to sustain the new baselines in pricing, now the reinsurance market has reset itself at higher levels.
The two areas of most constraint at these reinsurance renewals were the issues of peak zone US property catastrophe reinsurance capacity and coverage for strikes, riots & civil commotion and war, Gallagher Re states.
In the majority of other lines and regions the reinsurance broker said that “buyers have largely been able to source capacity,” although this is typically at higher cost and in many cases adjustments to structures, through attachments and terms.
James Kent, Global CEO, Gallagher Re, commented, “The renewal process has been bruising for market participants, many of whom have not faced such a rapid change in market conditions across a single renewal season. Political violence, terrorism and war renewals have been especially demanding in terms of finding a market consensus. The differences in opinion between buyers and sellers were aggravated by the perception that there was time to reach agreement on the complex issue of the Ukraine/Russia conflict well in advance of renewals.”
The response to the challenging environment has not been even, it seems. In fact, it’s becoming clear from the reports out so far that brokers are ready to point out where they feel markets have fallen-short of expectations.
“Times of significant market change are always challenging to navigate but we have seen a significant difference in the ways that individual reinsurers have reacted despite a widespread stated ambition to grow premium volumes in what is being viewed as the best treaty underwriting terms and conditions for a generation,” Gallagher Re CEO Kent added.
Continuing to say that, “Some have reached the end of the renewal season with reputations enhanced, exercising a firm, fair, transparent approach based on a commitment to their own view of pricing adequacy. Others who have acted less deftly may find sustaining long term client relationships more challenging, especially once capital and competition rebuild in the global reinsurance market.”
Gallagher Re further explained that it noted a divergence between reinsurers that were prepared to provide clear lead terms and capacity, versus others that awaited firm orders and then attempted to adjust terms at the last minute.
Meanwhile, the brokers ceding clients that had broad trading relationships have in some cases been able to secure preferred pricing and/or increased capacity, through a packaged approach.
While European property reinsurance renewals have completed more readily than US, Gallagher Re notes that it was “much later than the previous norm, in some instances by as much as a month or two,” reflecting the scale of the challenges faced.
The casualty reinsurance market was seen as more rational, but even here renewal terms are seen as tough, although also classified as fair by most buyers, Gallagher Re added.
Some new capital was seen, right down to the end of the year, the broker also said, bringing some relief in certain constrained areas of the market.
Read all of our reinsurance renewals news and analysis here.