Inflation hot topic at April ‘balanced’ reinsurance renewals: Gallagher Re

During an “undramatic” and “balanced” reinsurance renewal season on April 1, 2022, there was much discussion about inflation, with reinsurers keen to understand its impact on cedant portfolios, reports Gallagher Re .

The reinsurance broker’s latest View report for April 1 was released this morning, revealing modest increases in reinsurance rates characterized by orderly renewals, heavily focused on Japanese business.

Gallagher Re said inflation was a key topic at 1/4 as protection sellers sought to assess its impact on ceding companies’ portfolios and then factor it into their pricing models.

As a result, it was a simpler renewal for reinsurers who were able to demonstrate that their own underwriting takes inflationary impacts into account.

“The continued compression of the supply chain, the inevitable but always surprising return of inflation, and above all the shocking challenges presented by Russia’s invasion of Ukraine have been discussed at every major renewal negotiation. , none of these topics prevented a fundamentally orderly renewal, mostly in line with everyone’s expectations,” said James Kent, Global Managing Director (CEO), Gallagher Re.

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Amid Russia’s invasion of Ukraine, but also the current trend for reinsurers to seek greater clarity of coverage after COVID-19, as of April 1, the sanctions limitation and exclusion clause industry standard, LMA 3100, has been adopted almost universally, says Gallagher Re.

On the pricing side, the broker reports modest increases in reinsurance rates to 1/4, with claims-free catastrophe treaty rates posting similar single-digit increases seen at 1/1, on a risk-adjusted basis.

The P&C business saw a much wider range of price increases, following the trend seen in other recent renewals. While accident rates were generally stable, explains the reinsurance broker.

“The 1.4 renewal was mostly unspectacular and orderly. Insurers who were able to demonstrate the quality of their underlying portfolios were rewarded with favorable renewal terms. “Nor was it insufficient. The balance that’s been building over the last 18 months seemed to be coming in this balanced revival,” Kent said.

On the insurance-linked securities (ILS) side, Gallagher Re says collateralized reinsurance and sidecars remained relatively flat, while catastrophe bond issuance was strong in the first quarter of 2022 thanks to a year 2021 records.

As an example, Gallagher Re notes that the weighted average risk premiums for risks exposed to wind in the United States increased by 0.2 points to 6.7%, which corresponds to an increase in the expected loss to 3%.

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Jessica C. Bell