Price corrections drive reinsurance rates up, report says

Price corrections drove reinsurance rates up at the April 1 renewals, according to the latest 1st View renewals report from global reinsurance broker Gallagher Re.

Buyers faced similar discipline to that seen at Jan. 1 at the April 1 renewals, according to the report.

In some cases – especially within smaller markets that had avoided previous rate hikes – reinsurers imposed significant structural changes. These adjustments may have a profound impact on ceding insurers’ financials, Gallagher Re said in the report.

“No particular geography was immune from the price corrections that reinsurers maintained throughout the 1 April set of renewals,” said James Kent, global CEO of Gallagher Re. “We saw an enhanced pricing impact based on individual clients’ performance and their reinsurer relationships, but even the most favoured clients paid more, with reinsurer discipline being evident across the market. 

“Capacity was adequate to get cedants’ exposures covered, but April renewals are an inappropriate yardstick for the market’s overall supply-demand relationship as it is so heavily weighted towards Japanese exposures, which are significantly lower than the peak US exposures,” Kent said. “But we certainly didn’t see any meaningful new capacity, or any other indication that reinsurers are prepared to cede their hard-won pricing territory anytime soon. The combination of catastrophe losses and mark-to-market investment losses in 2022 means reinsurers will continue to coax the market towards rates which will help returns exceed the cost of capital.”