Despite economic pressures on reinsurers and cedants, nearly all buyers were able to secure coverage during the reinsurance renewal period. However, attachment levels and the cost of ceding risk were higher than most buyers desired, and supply constraints in some lines and territories caused stress not seen in years. As a result, according to Gallagher Re's latest 1st View renewals report, the reinsurance market has maintained its firming trend.
Despite mostly positive
H1 2022 results, the combination of inflation and rising interest rates has caused reinsurers to adjust their balance sheets and reserves while also taking into account how a recessionary environment may increase claims frequency.
These economic factors, combined with sustained loss levels, allowed reinsurers to maintain upward pricing pressure as they sought to reduce their appetite for volatility.
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Natural disaster capacity decreased overall as reinsurers continued to shift away from low-level layers, which differed by country and region.
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Reinsurers were seen assessing cedants' inflation-related actions and applying carefully calculated loadings to relevant treaties.
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The Russian invasion of Ukraine increased interest in cyber and war contract provisions.
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Long-tail casualty placements remained popular among reinsurers, but there was more debate about ceding commissions than in recent renewals.
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Higher ILS risk transfer prices have attracted net new capital, but this has not resulted in market softening.
The inflation discussions have been detailed and technical, with reinsurers eager to challenge cedants' model outputs. Most reinsurers are assessing reserve adequacy as interest rates rise, in addition to their concerns about primary rate adequacy in the new inflationary environment.
They are experiencing effects simultaneously on the asset and liability sides, which has strengthened their resolve to maintain the pricing momentum of the previous two years.