Reinsurance rate increases continued for most major lines and territories during the 1.6 and 1.7 renewal period; however, in many cases reinsurers had to accept firm order terms below their initial quotes. That indicates that the market is approaching equilibrium, according to the latest 1st View renewals report from Willis Re, the reinsurance division of Willis Towers Watson (NASDAQ: WLTW), a leading global advisory, broking and solutions company.
Reinsurers’ good Q1 results, generally low catastrophe losses, rising underlying reinsured premium volumes, positive investment trends, and the strong economic recovery from COVID-19-related economic pressures together moderated rate increases, despite reinsurers’ best efforts to maintain pricing momentum. Capacity overall remained more than sufficient to meet demand, but reinsurers resisted the temptation to compete for top-line revenue, so capacity for poorly performing classes was constrained.
Concerns over inflation and COVID-19 relates loss developments had no impact on pricing with flat or modestly rising rates for property renewals. Casualty risks saw less consistent changes to pricing and coverage, although the overall gentle upwards trend was similar. An exception was ceding commissions, which responded more directly to changes in the underlying rates and terms and conditions.
Momentum continued in the catastrophe bond market, which saw around US$6 billion of new issues in the second quarter of 2021, outstripping all new cat bond capacity issued in 2019. Significant investment inflows have narrowed margins and encouraged new cat-bond cedants.