Reinsurers saw modest increases at June 1 renewals as markets largely remained well-capitalized, while exclusionary language concerning communicable disease and cyber exposures became more pervasive and tighter.

The increases were lower than anticipated, some observers say.

“I don’t think reinsurers are getting what they thought they might be getting” in terms of rate increases, largely due to ample capacity, said Brian O'Neill, partner and client executive with TigerRisk Partners LLC in Tampa, Florida.

Reinsurance executives’ consensus “was that Florida property catastrophe reinsurance rate increases will come in below expectations established last year,” Meyer Shields, Baltimore-based managing director at Keefe, Bruyette & Woods, wrote in a note.

Florida renewals will end up at 5% to 10% higher on average, with increases on loss-impacted accounts potentially as high as 20% to 30%, wrote Mr. Shields.

Matt Fitzgerald, managing partner, London and U.S. property, casualty and specialty, for Gallagher Re, the reinsurance unit of Arthur J. Gallagher & Co., said property markets were weakest and saw the smallest pricing increases, with much of the casualty sector and specialty markets seeing increases of up to 10%. The top end included aviation and cyber, which he described as a hard market.

Cumulative losses from secondary perils including severe convective storm and wildfire have begun to touch insurers’ lowest reinsurance layers, causing losses to reinsurers, which have responded by tightening up on those lower layers.

“Rates continue to rise albeit at a reduced pace. Modest single-digit increases are the norm, with material rate pressure on lower, loss-impacted layers,” said Justin Lorence, senior broker in Minneapolis with Lockton Re, part of Lockton Cos. LLC.

Reinsurers’ appetites are “shifting up programs as (they) retrench from sustained frequency of cat losses in lower layers,” Mr. Lorence said.

“Some of the attritional catastrophe losses were leaking into those lower layers. Tornado, wind, etc., were causing losses that were actually starting to touch some of those lower reinsurance layers,” said Tiger’s Mr. O’Neill.

Severe convective storms caused higher than average losses in 2020, leading reinsurers to factor that into their view of risk, said George Carse, managing director, Florida segment lead, for Guy Carpenter & Co. LLC, part of Marsh & McLennan Cos. Inc.

“The challenges have been on these bottom layers that are exposed to frequency of secondary perils,” said Mohit Pande, head of property underwriting, U.S. and Canada, at Swiss Re Ltd. in Armonk, New York.

“Insurers have sought to place lower attaching programs that give them protection from increased frequency of secondary perils such as severe convective storm, and this has been met with some resistance from the reinsurance market,” Mr. Pande said.

Casualty reinsurance markets are seeing rate increases in the 10% to 15% range as concerns over social inflation persist, said Jessica Wassail, senior broker with Lockton Re in Philadelphia.

“Reinsurers continue to push risk-adjusted rate increases on casualty/primary liability and excess of loss deals on the basis of social inflation,” said Mark Braithwaite, senior broker, casualty market, for Lockton Re in New York, although he added that “clients which have achieved significant rate increases of 20% or more on their original portfolio in 2020 and are tracking similarly in 2021 are seeing improved reinsurance terms.”

Insurers faced not only rising prices but increasingly restrictive policy language as well, sources said.

There continues to be a push toward communicable disease and cyber exclusion clauses being inserted on most renewals as well as a tightening of the language, said Gallagher Re’s Mr. Fitzgerald.

“There’s a big concern around systemic risk at the moment. Obviously pandemic is one area; cyber is another,” said Mike Van Slooten, head of business intelligence for Aon PLC’s reinsurance solutions division in London.

“There is some genuine concern there and you can expect to see the reinsurers tightening up on the language they’re putting into the market to try to mitigate the downside in some of those areas,” Mr. Van Slooten said.

“Property reinsurance contracts are moving toward excluding silent cyber and getting more clarity around what’s covered when it comes to cyber,” said Swiss Re’s Mr. Pande.

In property markets, the increased requests for cyber exclusions are “almost ubiquitous,” according to Lockton’s Ms. Wassail. In casualty reinsurance, some reinsurers are requesting new communicable disease exclusions, but requests for cyber exclusions are not as ubiquitous as on property, she said.

Negotiating treaty policy language surrounding pandemic ramifications was “laborious,” but a “significant amount of work has been done to create a more defined market standard for communicable disease exclusions,” Guy Carpenter’s Mr. Carse said.

While rates rose generally across the board, they were tempered by ample capacity, aided by what Mr. Shields called “abundant ILS capacity.”

“There’s a lot of activity in cat bonds. It’s been a pretty active year,” said Aon’s Mr. Van Slooten.

Annual and fourth-quarter catastrophe bond issuance both set records in 2020, bolstering capacity in both the reinsurance and retrocessional markets.

Traditional reinsurers have also added capital and some new players have come to market, Mr. O’Neill said.

Renewal talks went smoothly overall, but the lack of face-to-face meetings was a factor, observers said.

 “Reinsurance is a relationship business and people like to look each other in the eye and shake hands,” said Mr. Van Slooten.

“Ultimately this is a relationship business and not being able to see one another is challenging and not ideal but business has been conducted smoothly and without undue delay,” said Swiss Re’s Mr. Pande.