“The end of a more challenging renewal season than most has, on balance, provided another rational outcome,” said Gallagher Re global CEO James Kent. “Many buyers have managed to secure sufficient capacity knowing the continued improvement in the underlying business has resulted in portfolios that are better balanced supported by largely consistent reinsurance structures to manage volatility and net lines.”
According to Gallagher Re, hopes for more profitable 2021 results were slammed back down by an increase in natural catastrophe losses, pushing many reinsurers to advocate for price increases, particularly on underperforming contracts.
However, not everyone in the market felt the pressure to increase prices, with quota share placements on non-catastrophe lines still keenly sought. For example, quota share placements for US professional lines and casualty and some global specialty lines saw buyers achieving higher commissions on the back of continued rate increases for many primary lines of business, reduced cession percentages, and heightened capacity supply.
Gallagher Re also noticed that the market appears to have recovered from the COVID-19-related claims in 2020 as primary companies’ claims reserves have stabilised and reinsurance recoveries move through the market, with an increasing number already settled.
Aside from natural catastrophe losses, reinsurers also discussed loss cost inflation across short and long-tail classes. Specifically, long-tail lines’ pricing of excess loss coverage was dominated by concerns around underlying cost inflation and wider social inflation. Meanwhile, inflationary concerns on short-tail lines that revolved around constricted supply chains and labour supply leading to loss cost inflation were prominent.