Mid-year renewals: orderly but market set to be tested

Welcome to a new edition of Prospective, which this month focuses on some of the key themes that emerged at the recent mid-year renewals, now that the dust has settled and our participants have been able to reflect on the market dynamics which shaped the outcome.

While rate increases have tapered off somewhat given the capital-rich environment players in the market are operating in, the general consensus is that on the whole the mid-year renewals were orderly, with underwriters exercising discipline in most areas.

However, the drivers behind much of this discipline are rooted in challenges the industry continues to grapple with.

In addition to tensions building around Covid-19 claims and the rise in social inflation, the backdrop of significant loss activity especially in relation to non-modelled weather events and growing concerns around cyber are all aspects underwriters are particularly concerned about.

During the 30-minute programme, we dive into these key areas:

You will hear from Guy Carpenter’s Will Garland, Convex Insurance’s Matt Paskin and Everest Reinsurance’s Jim Williamson, who will share their expectations for upcoming renewal discussions based on what their current experience has been in 2021.

On pricing at the mid-year renewals…

“1 June was definitely stronger than 1 July, and that’s a reality”– Jim Williamson

“As much as we’re talking about these 800-pound gorillas in the room – of Covid, casualty deficiency and the rest – they weren’t necessarily coming to the fore”– Matt Paskin

On capital…

“This increase supply [of capital] has resulted in the softening of cat bond pricing and contributed to the stabilisation of the traditional cat XoL market. So clearly, ILS has had an impact on US property cat and renewal momentum as insurers have seized upon the competitive landscape to address their needs”– Will Garland

On changing quota share appetites…

“I think we have to be careful in painting a picture where there’s been a massive shift from quota share to XoL in the marketplace”– Will Garland

On ceding commissions…

“You’ve got to believe some very magical things about how those losses are going to turn out to offer some of the ceding commissions we’ve seen and those are deals we are not doing”– Jim Williamson

On Covid-19…

“We’re in a very interesting place. No one is saying it isn’t out there. There is debate about the quantum … but it’s definitely going to take a little bit of time and some interesting conversations are happening”– Matt Paskin

On cyber…

“Angst over loss ratios by reinsurers is putting pressure on quota share ceding commissions and aggregate XoL rates”– Will Garland

Look out for follow-up commentary and in-depth analysis of episode segments this week on The Insurer TV…