Reinsurer appetites in the Middle East are steady but there are clear signals of a firming reinsurance market in the region, says Willis Re in its latest "1st View" report which covers current market conditions at key reinsurance renewal seasons.
The 1 July 1st View report also notes that infectious disease exclusions were imposed across all property reinsurance lines in all territories in the region despite modest loss expectations.
Furthermore, there is considerable uncertainty on economic outlook arising from pandemic lockdowns compounded by oil price collapse.
Globally, the reinsurance market is currently not capital-constrained but is increasingly focused on underwriting profitability. This approach, outlined in previous 1st View updates, has gained momentum and was in clear evidence during the 1st June and 1 July renewals.
Despite a reduction in over-placements on some lines of business and territories, ultimately insurers were able to secure sufficient reinsurance capacity at the 1 July and 1 June renewals, notes the report.
2Q2020 has witnessed a remarkable recovery in the capital base of the global reinsurance market as investment markets rebounded and investors showed real appetite to commit additional equity and debt to both incumbents and startup companies. Current estimates of the reduction in the capital base of the global reinsurance industry are now down only 5% by the end of June when compared to the end of December 2019 and the 30% drop witnessed at the end of March 2020.
While the market is now showing signs of more persistent hardening, the approach from reinsurers remains logical and measured with clear differentiation between clients, lines of business and territories. In many cases where reinsurers are supporting their clients through proportional reinsurance contracts, they have been prepared to leave reinsurance treaty terms and conditions largely unchanged if the primary business being ceded is showing significant improvements in original pricing and conditions.