Gallagher Re reviews on “difficult” January reinsurance renewals
“The end of a more difficult renewal season than most has resulted in another rational outcome overall,” said James Kent, global CEO of Gallagher Re. “Many buyers have managed to secure sufficient capacity knowing that continuous improvement in the underlying business has resulted in more balanced portfolios supported by largely consistent reinsurance structures for managing volatility and net lines.”
Gallagher Re said hopes for more profitable results for 2021 were dashed by a surge in natural catastrophe claims, leading many reinsurers to advocate price increases, especially on underperforming contracts.
However, not everyone in the market felt pressure to raise prices, and quota placements on non-disaster lines continued to be in high demand. For example, when buying quota shares for professional lines and liability insurance in the US and some global specialty lines, buyers received higher commissions due to continued rate increases for many main lines, lower cessation percentages and increased capacity provision.
Gallagher Re also noted that the market appears to have recovered from COVID-19-related claims in 2020 as primary company claims reserves stabilized and reinsurance moves across the market, with an increasing number already being wound up.
In addition to natural catastrophe claims, reinsurers also discussed claims cost inflation in the short and long tail classes. In particular, pricing for covering excess losses on long tail lines has been dominated by concerns about underlying cost inflation and broader social inflation. Meanwhile, inflation concerns were central to short-tail lines, which revolved around tightened supply chains and labor supply, leading to cost-of-loss inflation.