Year-end renewal one of the most challenging ever: Guy Carp
The January 1 renewals proved to be one of the most challenging reinsurance markets the sector has experienced, as reinsurers and cedents work to establish a new market equilibrium, according to Guy Carpenter.
In a renewal season the broker described as extremely late, it said that, ultimately, placements were largely completed at client issued structures and pricing, without many of the requested modifications in coverage. “Reinsurers presented fractured views at the outset, with more extreme coverage modifications threatening to erode the core value of the reinsurance product,” Guy Carpenter said.
“However, progress was made finding paths to completion and many non-concurrent coverage issues were resolved, Guy Carpenter said.
“Looking past the renewal of January 2023, it’s important to remember that we have been at crossroads before,” said Dean Klisura, president and CEO, Guy Carpenter. “In prior reinsurance cycles, significant catastrophe loss events such as Hurricane Andrew, the attacks of September 11, 2001, and Hurricanes Katrina, Rita and Wilma were the catalysts for market corrections that preceded new capital entering the sector. It is imperative that the industry stay focused on providing workable client solutions, thorough coverage and balanced pricing for the long-term sustainability of cedents and markets. Our top priority is ensuring that clients are getting the coverage and clarity they require in order to conduct their business.”
The report by the broker said that property was the most challenged sector. Market adjustments focused on three distinct areas: pricing, attachment and coverage. It also noted that an imbalance of supply and demand in property-catastrophe drove a stressed market and, in some cases, led to pricing and structural changes unsupported by technical considerations. “While conditions warrant a market correction, not all outcomes were logical or sustainable. Average price adjustments and increased attachment point movements were substantial across the portfolio, worldwide.”
It also noted that while some reinsurers reduced or withdrew their property capacity in 2022, others are now viewing this market inflection point as an opportunity to increase their participation and future outcomes should stabilize as capacity deficiencies moderate.”