Canadian Underwriter

Price is key as reinsurance, ILS demand rises


September 6, 2018   by Staff


Print this page

money 2There could be more demand for reinsurance capacity at the upcoming January renewal season, but buyers may be demanding and price will be a key bargaining factor, finds a survey by Reinsurance News and Artemis.

“With this survey we wanted to take the temperature of the global reinsurance market at what is a key time for the industry,” explains Steve Evans, owner and editor-in-chief of the two publications. “We’ve seen dramatic changes in reinsurance market dynamics over the last few years, not least the evolution and expansion of the insurance-linked securities (ILS) market.”

Here are some highlights from the survey, which was conducted last month.

  • Generally, pricing is expected to be relatively flat across most lines of reinsurance business, with the most significant rate increases anticipated for U.S. property catastrophe risks following the losses of 2017, retrocessional protection, as well as certain underperforming or emerging lines of business. However, even these lines are only expected to experience rate rises in the low single digits. Overall, the feeling is that rate momentum will continue to fade at the January 2019 renewals.
  • Half of respondents believe that it will take a catastrophic loss of more than $200 billion, with the majority opting for a loss of more than $250 billion, to drive a meaningful turn in market pricing.
  • Insurance-linked securities (ILS) and third-party capital is expected to expand further and claim an increasingly larger slice of the overall reinsurance market pie. The expectation is that the ILS market will account for between 20% and 25% of dedicated reinsurance capital by 2020. At the same time, 65% of our survey respondents plan to use more ILS capital within their businesses.
  • Reasons for purchasing reinsurance protection remain varied, but earnings protection and reducing catastrophe exposure were the two most important factors to those surveyed. Regardless of the reasons, a large majority of respondents plan to purchase a similar level of reinsurance protection or a little more in 2019, suggesting a slight uptick in demand.
  • Respondents ranked the key factors they would consider when choosing a reinsurance counterparty for the renewals, and price was ranked as the most important, followed by credit quality/rating.

Canadian Insurance Top Broker is now on Facebook (facebook.com/TopBrokerMag) as well as LinkedIn (linkedin.com/company/citopbroker) and Twitter (twitter.com/CITopBroker). Follow us for easy access to the top P&C news you need to know. 

This story was originally published by Canadian Insurance Top Broker.


Print this page