Reinsurers flood the safe zones in “highly differentiated” approach to January renewals – Gallagher Re

Reinsurers secured further improvements in overall pricing during the January reinsurance renewals, but chiefly by splitting their approach by segment, client and portfolio to squeeze the steepest pricing gains from increasingly anathema segments, analysts at  Gallagher Re said in a report on the just-concluded renewals season.

Gallagher claims a "wide range of outcomes, highly differentiated by client, portfolio and territory with final terms invariably settled on a client and portfolio-specific basis." Pinched by a tight retrocession market, some capacity was ultimately withdrawn for select higher-risk lines.

Property cat rendered pricing that varied wildly by territory and client, Gallagher claimed. Large rate increases hit the more loss-bearing programmes, especially those with lower attaching layers exposed to secondary perils. Comparatively loss-free programmes were said to get by largely unscathed, Gallagher said to echo a growing consensus on the 1.1 pricing scene.

US pricing was up by a composite 2.5 to 10% in loss-free segments and by 10 to 25% in loss hit lines, the report showed. Europe was flat to 7.5% in loss-free lines, but 5% to 25% up in risk loss hit and 15 to over 50% for catastrophe loss hit, the data indicated.

Reinsurer pricing demands did not prove so very aggressive across the full spectrum of lines. Reinsurers were said to have "keenly sought" quota share placements in non-catastrophe lines everywhere that portfolios have shown "consistent improvement in original pricing and conditions" in recent years, authors claimed. Quota share placements for US professional lines and casualty, and other unspecified global specialty lines were said to have benefitted as well.

Those regions of abundant capacity ultimately helped the market overcome the conflicts elsewhere to ultimately clear the market, Gallagher said

"In many cases, the signing allocations on these more sought-after treaties were used to help the placement of more stressed lines of business such as casualty excess of loss, cyber, property cat and property risk," authors wrote.

Loss cost inflation further fuelled reinsurer demands, "featuring widely" in both short- and long-tail classes. Pricing of XOL covers in long-tail lines was said to be dominated by conflicts over underlying cost and wider social inflation. Supply chain and labor shortages drove inflationary concerns in pricing short-tail lines, authors claimed. Concerns over understated property values permeated all talks.

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.