One ray of light in the hard market

Despite signs of hardening in certain reinsurance markets, and certainly in the primary market, general third-party liability treaties represents a silver lining in the cloud.

“Many general third-party liability treaties are ancillary to traditional property treaties and have generally remained profitable for (re)insurers,” reinsurance broker Willis Re wrote in the Canadian casualty commentary section of its 1^st View: Markets Diverge renewals report, released Jan. 1. “Reinsurer appetite for casualty-related lines of business remained generally stable as reinsurers sought to balance property portfolio exposures.”

In Canada, reinsurance pricing is increasingly dependent upon individual buyer experience, Willis Re said. The reinsurance broker also noticed “increased dislocation in some individual reinsurers’ positioning on long-tail casualty business.” And similar to property lines, specialty casualty business with loss emergency saw rate increases of +10%.

Looking at the Canadian property segment, risk-adjusted catastrophe reinsurance pricing remained in-line with 2019 renewals, Willis Re reported. For per-risk placements, single-risk losses have continued to adversely impact lower layers, the reinsurance broker said. Reinsurance pricing continued to firm on loss-affected layers of programs. Pricing of loss-free per risk layers remained flat year-on-year.

The primary market is experiencing hardening across all major property lines, Willis Re noted. Commercial and strata business lines are seeing +20% rate increases, driven by recent years’ underwriting experience as well as segmented supply shortages (particularly from Lloyd’s syndicates), according to 1^st View: Markets Diverge.

Overall, the January renewal season concluded later than in previous years; some placements are still not completed at year-end. “Reinsurers have been resilient, but much more judicious in how they allocate their capital,” wrote James Kent, global CEO of Willis Re, in the report. “Renewals saw significant variation in pricing and capacity depending on the geography, product line, loss record and individual client relationships. This variance resulted in a market demonstrating several views, in both pricing and terms & conditions, with more divergency than at any point in many years.”

Guy Carpenter & Company agreed that reinsurers have been resilient, concluding in its Jan. 2 assessment report of reinsurance market trends that reinsurance supply is largely sufficient to meet increasing demand in all but the most constrained areas. Guy Carpenter also noted significant variation in pricing and capacity. Jan. 1 renewals reflected an “asymmetrical” market, Guy Carpenter said, featuring a mixed bag of rate increases or decreases depending on the specific business line or territory, as well as significant rate increases in the retrocession markets.

For example, pricing corrections in property catastrophe lines showed a lot of variation based on geography and business line. On the casualty side, reinsurers (particularly in the United States) were seeing cost pressure leading to reinsurance rate increases in general liability, directors’ and officers’ and medical professional lines.