Extreme reinsurance coverage modifications were sought by reinsurers for 1/1 2023 renewal

The renewal reinsurance season ran extremely late this year as both reinsurers and cedents worked to establish a new market equilibrium.

According to Guy Carpenter, placements were largely completed at client issued structures and pricing, it reported, without many of the requested modifications in coverage.

But while the market is still clearly unsettled, progress has been made finding paths to completion and that many non-concurrent coverage issues have been resolved.

This was after more extreme reinsurance coverage modifications that were initially sought by some reinsurers for Jan 1 threatened to erode the core value of the reinsurance product.

In prior reinsurance cycles, significant catastrophe loss events such as Hurricane Andrew, the attacks of September 11, 2001, and Hurricanes Katrina, Rita and Wilma were the catalysts for market corrections that preceded new capital entering the sector.

While some reinsurers reduced or withdrew their property capacity in 2022, others are now viewing this market inflection point as an opportunity to increase their participation, meaning future outcomes should stabilize as capacity deficiencies moderate.

Beyond property, requirements varied, with treaty results in lines such as casualty being highly dependent on prior-year results, underlying rate changes, and overall portfolio performance, with pressure on pricing seen across most lines.

It is imperative that the industry stay focused on providing workable client solutions, thorough coverage and balanced pricing for the long-term sustainability of cedents and markets.

Property was unsurprisingly seen as the most challenged sector at 1/1 with adjustments focused on pricing, attachment and coverage, although these were largely limited to terror and strike, riot and civil commotion clauses.

The imbalance of supply and demand in property catastrophe also contributed to a stressed market and, in some cases, led to pricing and structural changes “unsupported by technical considerations” and with unsustainable outcomes.

by Yana Keller