While COVID-19 dramatically disrupted the financial markets, reinsurers took a measured approach to the April renewals – which saw significant rate increases on loss-affected accounts and more modest rises on loss-free business, according to a renewals report from Willis Re.
The global reinsurance sector moved smoothly to the new working-from-home model following the COVID-19 outbreak and was able to provide uninterrupted service, said the report.
“Having demonstrated its ability to manage the operational challenges of COVID-19 so far, the global reinsurance industry is well-placed to demonstrate its ability to manage the longer-term financial challenge and continue with its mission of providing support to primary insurance companies and their policyholders,” said Willis Re global CEO James Kent.
He also said that the timing of the COVID-19 disruption fortunately coincided with the global reinsurance market being in a very strong financial position supported by strict regulation.
For the April renewals, the largest risk-adjusted property price increases were seen on loss-hit CAT treaty contracts, which were up +30% to +50% for Japanese wind exposures. Loss-free treaties meanwhile saw less dramatic rises and, in a handful of cases, renewed as expiring.
However, capacity provided through insurance-linked securities decreased slightly, with occasional examples of funds reducing their 1 April offer due to recent investor redemptions.
At the same time, reinsurers’ COVID-19 response was impacted by timing and underlying coverage considerations. While early firm orders were completed without specific exclusionary language, several reinsurers sought exclusions in other cases.
In some circumstances, these were achieved; in others, buyers provided comfort through letters of understanding which explained that underlying original polices have no exposure to COVID-19-related losses. M