Capacity largely sufficient in most classes but some constraints in retro and certain specialty classes

The 1 April ‘Asia book’ renewals took place in an orderly fashion, according to the 1st View report from Gallagher Re. It found capacity was largely sufficient in most classes but there were some constraints in certain speciality lines and retrocession classes.

In line with 1 January 2022, modest single digit increases on property catastrophe covers supported by the significant increases in recent years on Japanese windstorm catastrophe rates following major losses and for most portfolios underlying stable or increasing original rates.

“There were continuing signs of some reinsurers adjusting their appetite for catastrophe risk by moving their capacity to higher attaching layers and in some cases reducing deployed capacity,” said James Kent, global CEO of Gallagher Re. ”This was offset by some modest increases from other reinsurers seeking to build out their portfolios.

Inflation a key topic

“Inflation remains a major and growing concern for reinsurers,” he continued. “1 April 2022 renewal period is largely driven by the Japanese renewals which have seen substantial rate increases in recent years after recent major catastrophe losses, steady improvement in original property rates and no reduction in original earthquake rates.

“It is now a key topic on every line of business with reinsurers assessing the impact of inflation on underlying portfolios to then be reflected in reinsurance pricing models. 

”Buyers able to verify that their original underwriting is taking inflation into account through pricing, limit and original deductible management are being recognised by reinsurers and facing less pressure on their reinsurance renewal terms.

“The tragic situation in Ukraine and the rapid evolution of far stricter sanctions regulation across the world has had an immediate impact on relevant clauses within treaties with the universal adoption of the market standard clause LMA 3100.

“Coming on the heels of the unexpected and unmodelled COVID-19 losses in 2020, several reinsurers have pushed harder for greater clarity over any potentially unclear areas of coverage particularly in the area of potential war exposures and incidental exposure from non-sanctioned exposures of overseas companies in Russia and Belarus.”

Unlike COVID19 losses in many cases buyers have been able to show that they do not have exposures of this type.

“For carriers with a bias towards specialty lines with potential war exposures, the position has been more nuanced and dependent on the original coverage and class of business.”