The Insurer TV’s first-ever on-demand programme examines the factors that have been influencing negotiations in the run-up to the 1 January reinsurance renewal.
Scor’s Conoscente said: “There is a lot of discussion going on about the claims that are being submitted, whether they’re covered or not and how they might aggregate through the reinsurance treaties and that is dominating much of the conversation.”
Indeed, one of the most contentious areas has been property business interruption, which has been the scene of a mass of litigation.
But while losses have come in across multiple lines of business – often on policies where pandemic wordings had not been properly contemplated – the latest disclosed loss estimates by companies across the P&C industry total around $30bn, which is well below some of the worst-case industry loss scenarios suggested earlier this year.
“While Covid losses continue to grow in the industry, we think most will agree that the overall loss experience has been far better than initially feared and uncertainty has somewhat declined,” said Darius Satkauskas, vice president, insurance equity research at KBW.
Covid-19 has also triggered much more in-depth conversations around treaty wordings and exclusions, which The Insurer TV programme discusses at length.
“Another area of discussion is really around treaty wordings, where of course a contagious diseases exclusion is being pushed through on all property treaties, but it’s also reviewing the different areas of treaty wordings whether it is event definition or other coverage areas, like silent cyber,” said Conoscente.
According to several industry figures who feature in our programme, challenges around terms and conditions emerged as one of the biggest features of 1 January negotiations.
However, hardening rates and the prospect of continued pricing momentum in 2021 has also been a driving theme during discussions.
After years of soft market conditions in the broader P&C sector, the primary insurance and retro markets were already well into hard, or hardening, territory before Covid-19 hit.
While reinsurance pricing had been lagging, there were signs of change in property cat at mid-year Asian and US wind renewals in the last two years, and of incrementally improving terms in casualty.
Even without the pandemic, the expectation was that pressured fundamentals from low interest rates, social inflation and climate change meant that the reinsurance market would continue to catch up.
Of course, the market has faced other loss challenges in 2020, with natural catastrophes and other man-made events adding to the overall loss bill.
However, Covid-19 has been a shock event of some magnitude and – while the overall consensus is that the market will be able to absorb the impact and can expect to report fewer pandemic-related losses in 2021 – its ramifications will be felt for some time.
KBW’s Satkauskas said reinsurers are on course for the “the best 1.1 renewals since 2002”.
He continued: “While much of this pricing momentum will be based on cedants’ individual loss experiences, the momentum is there.”
KBW currently anticipates 2-3 percent headline risk-adjusted rate increases on European cat business, which is the best it’s been since 2002, but expects more meaningful increases to be driven by the US.
But while market discipline has improved, capital levels in the industry could limit the magnitude and the duration of the cyclical upturn, said Satkauskas.
Watch full programme here or below:
Throughout the programme, we will be covering:
- Key drivers influencing 1 January 2021 renewals
- Impact of Covid-19
- Terms and conditions: negotiating the fine print
- How casualty is at the heart of the battleground in the lead up to 1.1
- Start-up capital and the new class of 2020
You will hear from our expert guests:
Ken Brandt, President of Underwriting Operations, TransRe
Jean-Paul Conoscente, CEO, Scor Global P&C
Dinos Iordanou, Non-executive Chairman, Vantage
Mike Mitchell, Head P&S Underwriting Reinsurance, Swiss Re
Lara Mowery, Global Head of Distribution, Guy Carpenter
Tony Rettino, Founding Partner, Elementum Advisors
Darius Satkauskas, Vice President, Equity Research - Insurance, KBW
David Bull, North American Editor, The Insurer
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