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US reinsurance rates up sharply at January renewals

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Reinsurance

The United States saw the highest reinsurance rate increases at Jan. 1 renewals, followed closely by Europe across some lines, according to separate reports Monday from Howden Insurance Brokers Ltd., part of Howden Group Holdings, and Willis Re, the reinsurance business of Willis Towers Watson PLC.

Policy wordings also tightened with the addition of pandemic exclusions, and cyber coverage drew additional scrutiny.

Global property reinsurance rates rose by an average of 6% at Jan. 1 renewals, the largest year-over-year increase in over a decade, Howden said in its report.

Catastrophe exposed loss hit accounts in the U.S saw the greatest increases, ranging from 10% to 25%, according to the Willis Re report. Catastrophe exposed loss free risks saw increases of 5% to 15%, while non-catastrophe accounts with losses saw rates climb 5% to 20%. Rate for loss free non-cat risks renewed flat to up 15%, Willis Re said.

Canada and China also showed some double-digit increases, while rate increases across Europe generally averaged in the single digits, the Willis Re report showed.

Casualty reinsurance rates, including adjustments for exposure changes and ceding commissions, rose by 6% on average at  January renewals, Howden said, double the 3% seen at January 2020 renewals. “Higher loss cost trends and lower interest rates were key inflating factors, pushing up pricing overall for all but the top performers.”

Terms and conditions tightened, with wordings for pandemic and cyber under particularly close scrutiny, often leading to more exclusions, Howden said.

The U.S also saw the largest casualty rate increases, according to Willis Re data, with increases to loss hit accounts ranging from 10% to 30% for general liability coverage, and from 5% to 25% for both healthcare liability and professional liability. Europe was not far behind with increases of 10% to 25% for loss hit accounts.

Reinsurers are seeking rate increases as investments provide a smaller component of earnings. Quantitative easing on the part of governments in response to the COVID-19 pandemic “brought immediate pressure to investment returns,” Howden said. “Risk carriers are now clearly unable to rely on investment income to compensate for increased loss trends.”

Elevated catastrophe frequency in 2020, including 21 separate events in excess of $1 billion, led to an above-average loss of $84 billion, Howden noted. This included the busiest North Atlantic hurricane season on record, with 30 named storms.

Specialty markets saw some of the largest reinsurance rate increases, according to Willis Re data, with aerospace markets topping the list with increases from 50% to 250%.

Non-marine retrocession markets rose 10% to 20%, Willis Re said.

More insurance and risk management news on the coronavirus crisis here.

 

 

 

 

 

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