April 1 renewals largely following direction set at January 1 renewals: Willis Re

The April 1 2017 renewal season “has largely followed” the direction set at January 1, the latest 1^st View renewals report from Willis Re said.

2016 generated an “acceptable, though reduced” return for the global reinsurance industry, Willis Re, the reinsurance division of global advisory, broking and solutions company Willis Towers Watson, said in a press release on Monday.

According to the Willis Re 1^st View report, in the face of soft market conditions and the limited number of acceptably priced opportunities, many reinsurers remain prepared to let their top line revenue growth stall and are opting to return excess capital to their shareholders. The report also said that overall limits purchased have not reduced as more buyers seek additional protection on their growing portfolios.

Capital markets have maintained a competitive posture that emerged at the end of 2016, with many insurance-linked securities (ILS) funds looking to offset the decline in opportunities as existing catastrophe bonds mature. “Catastrophe bond spreads have continued to decline as many investors have become keen for increased liquidity,” the release added.

For long tail classes, the March 2017 changes to United Kingdom-specific discount rates (in the government’s actuarial “Ogden Tables”) for assessing personal liability claims has not yet made an impact in the wider reinsurance market, Willis Re pointed out.

In the United States, the “poor results” in the auto business, both commercial and personal lines, and in excess workers’ compensation, provide examples of classes where reinsurers are seeking improving terms. “Further, it is evident that ceding commissions on large account liability business peaked towards the end of 2016, as for recent renewals flat pricing has largely been the norm,” the report said. Lack of major property cat loss activity and abundant capital continues to drive the soft market, with price changes generally in line with January renewals.

“As reinsurers look to the rest of this year, they can draw comfort that in many cases, the reductions are slowing and unbridled competition is abating as the managers face the buffers of tighter regulation, better pricing analytics and transparent shareholder expectations,” John Cavanagh, global CEO of Willis Re, said in the release.

The Willis Re 1^st View report is a thrice yearly publication, including specific commentary on key trends throughout the world’s major reinsurance classes and regions.