Property rate increases more moderate than earlier predicted
Source: Middle East Insurance Review | Feb 2021
Reinsurance pricing firmed up during the 1 January renewals although rate increases were more modest than what had been expected earlier in the year, due to abundant capital levels and greater willingness of reinsurers to deploy capacity in several sectors, according to Guy Carpenter & Company.
Ample capacity was available from both incumbents and new entrants to the property reinsurance market during the fourth quarter of 2020. The property segment saw pricing “generally settled at the lower end of expected increases outside of more constrained segments”, said Guy Carpenter in a press release. It added that “where placements were loss impacted, particularly in cases where retentions were perceived to be too low, reinsurers held firmer on pricing or structure adjustments”.
For Asia-Pacific, risk-adjusted pricing increased by low single digits on average for non-loss impacted programmes.
Willis Re also noted that ASEAN buyers saw flat to low single digit risk-adjusted rate increases for loss-free renewals, while pricing correction was less than expected for China’s property segment.
Loss implications from COVID-19 were not as disruptive as feared earlier in the year, and most programmes were renewed without factoring in potential COVID-19 losses as these were often either advised only late in the renewal process or are yet to be advised.
While emerging COVID-19 losses triggered technical discussions of primary policy coverage and reinsurance treaty wordings, they remain in the early stages of deliberation and adjustments would only be seen in future renewals, said Willis Re.
Predictably, reinsurers have largely been unwilling to accept ongoing communicable disease exposures and its exclusion was a key discussion area on every property renewal worldwide.
“There has been a substantial amount of focus across the industry on the best approach to satisfy the need for an exclusion, while not eroding critical protection for covered perils,” said Guy Carpenter. M