According to the recent January 2022 Reinsurance Renewal: An Evolving Market Leads to Divergent Outcomes briefing from ICMIF Supporting Member Guy Carpenter, January 1 renewals reflected a healthy but evolving market as reinsurers adjusted risk appetite and pricing thresholds for certain sectors in response to ongoing and emerging challenges. Despite this, the majority of placements were ultimately orderly once cedents’ terms were issued, as market participants effectively traded through a dynamic environment.

The briefing shows that the sector has once again proved its ability to evolve and grow to meet an ever-changing risk landscape.

Key findings of the briefing:

• The most significant macro influences at renewal included climate change, core inflation, social inflation, continued underlying positive rate change across most lines of business, and continued evolution of the frequency and severity of catastrophe loss.
• Reinsurers continued to expand their differentiation of each client’s unique placement characteristics. These include a view of underlying risk, loss experience, claims performance, strength of management, business strategy, perceived adequacy of pricing and structure, and depth of the client relationship.
• Conditions were bifurcated between non-loss-impacted and loss-impacted programs.
• Capacity was ample for many lines but more constrained for retrocession and some components of property, including loss-impacted lower catastrophe layers and aggregates. Capacity for cyber aggregates was also limited.
• The property renewal process ran up to 14 days behind typical timing, creating a flurry of activity with two weeks (and fewer working days) left in the year. Key drivers of the later renewal included shifting risk views impacting pricing models and capacity allocations, uncertainty around trapped capital/loss estimates and a very late retrocession renewal.
• Casualty renewals were generally orderly, with pressure seen in several pockets, including cyber aggregate, clash and loss-impacted excess of loss programmes.
• The Guy Carpenter Reinsurance Composite index is on track to deliver a combined ratio below 100% for 2021 and a projected reinsurer return on equity of near 10%, even after accounting for over USD 100 billion of global large loss.
• The Guy Carpenter Global Property Catastrophe Rate-on-Line Index increased 10.8%.

Read the key renewal commentary and download the briefing here.