Buyers absorbed more rate hikes in April 1 renewal

Reinsurance buyers were unable to avoid the variable but universal price corrections driving rates up at the 1 April renewals, according to the latest 1st View renewals report from Gallagher Re, the reinsurance broker.

The renewal was challenging, with buyers facing similar discipline from the reinsurers to that seen at 1 January. In some cases, particularly within smaller markets that had escaped previous rate hikes, significant structural changes were imposed by reinsurers. These dramatic adjustments may have impacted ceding insurers’ financials profoundly.

James Kent, Global CEO of Gallagher Re, said: “No particular geography was immune from the price corrections that reinsurers maintained throughout the 1 April set of renewals. We saw an enhanced pricing impact based on individual client’s performance and their reinsurer relationships, but even the most favoured clients paid more, with reinsurer discipline being evident across the market.

“Capacity was adequate to get cedants’ exposures covered, but April renewals are an inappropriate yardstick for the market’s overall supply-demand relationship as it is so heavily weighted towards Japanese exposures, which are significantly lower than the peak US exposures. But we certainly didn’t see any meaningful new capacity, or any other indication that reinsurers are prepared to cede their hard-won pricing territory any time soon. The combination of catastrophe losses and mark to market investment losses in 2022 means reinsurers will continue to coax the market towards rates which will help returns exceed the cost of capital.”