Work still needed to ease reinsurer/cedant tensions

After a couple of decades of a soft market, expectations between reinsurers and cedants have changed considerably, the impact of this playing out in tense renewal at 1/1 2023 and continuing to some extent this year.

This was the view of a panel of senior industry executives speaking at the Intelligent Insurer’s Re/insurance Outlook Europe 2023, in Zurich this week (June 19 and 20).

Delegates in the session, titled ‘Resolve tensions between reinsurers and cedents’, heard panellists agree that there are always tensions between these two groups but that the arrival of the hard market had heightened this. And many reinsurers didn't know how to communicate on 1/1 because they’d never seen this type of situation before, the panel said.

Panel speakers included Charlie Bartlett, deputy regional chief underwriting officer, Europe-Canada & CUO, UK, Reinsurance, SCOR P&C; Mark Meyerhoff, chief regional officer Europe, MAPRE Re; Matteo Cussigh, CEO, Peak Re AG; and Luca Tres, managing director and head of EMEA Strategic Risk and Capital Life Solutions, Guy Carpenter.

MAPRE Re’s Meyerhoff said: “Don’t forget that we come from a couple of decades of soft market, expectations are different from the client side.”

Ahead of the 1/1 2023 renewals there was a moment of big stress, which he described as “a shock for people, but not for everyone, brokers realised”.

Meyerhoff added: “Reinsurers from their end had to react to a background of uncertainty, for example around retro. We didn’t know until late whether we would have capacity or under what conditions.

“At Baden-Baden nobody was giving quotes, nobody wanted to be the first or the cheapest or the most expensive.”

SCOR P&C’s Bartlett said that in September 2022, around Monte Carlo, it was clear what the market wanted even if the level of pricing from reinsurers was not entirely clear.

“We’d had losses in February in the Netherlands and other places, which had highlighted issues with aggregation. Progress [on negotiations] was slow, partly because of retro and because people didn’t want to move too early.

“Between Monte and Baden-Baden, there was hurricane Ian, which meant six years of bad results, and which made the pain of retro greater still.”

Bartlett added that it wasn’t clear what reinsurers’ priorities were when it came to choosing between terms and conditions, structure and price. “And we’re still not there. [Renewal] was a big challenge.”

Peak Re’s Cussigh said that communications during renewal talks had not been perfect and that “there was more work to be done in the first part of this year” because the partnership between reinsurers and cedants is a long term one. “We need to be clear about why we have done things and what other people at the table can expect from us.”

Guy Carpenter’s Tres said: “The more the market knows the easier it will be to avoid these tensions.”

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