The first feedback shared publically regarding the state of the insurance and reinsurance markets for the 1st January renewals has been from some of the larger brokers and was slightly cooler than most expectations.  Against the backdrop of large natural catastrophe events late in 2018, including the Californian wildfires, and reduced capacity, especially as a result of the measures taken by Lloyd’s to improve market profitability for 2019, it was expected that the main reinsurance renewal date of 1st January would see rate rises.  Feedback from the market is that these expectations were dashed and that reinsurance programmes generally were “flat to down”.

JLT Re commented that “pricing was broadly stable at the 1 January 2019 renewal, despite pressures building in the reinsurance market” (full report here).

Within this broad view, some areas of the market – especially loss affected accounts, aviation and casualty – did see rises, some well into double-digit territory.  However the main picture is one of abundant capital competing to get access to the most attractive risks in the market.  Willis Re, in their commentary on the market, titled “Contrasting Realities” (full report here) noted that US accounts with peak peril exposures or poor loss records seeing 5-20% increases.  This was in contrast to clean, typically European programmes, which were able to achieve reductions – by applying pressure from the quantum of capacity in the market.

From a Lloyd’s syndicate perspective, the picture is more nuanced.  Whilst we are still in the process of canvassing opinion from across the market, there are pockets of positivity.  Some direct lines are seeing a shortage of capacity, specifically in marine, property (direct and facultative) and A&H which is translating into more attractive rates.  Although Lloyd’s “decile ten” actions have grabbed headlines, the Willis report notes that there are many other examples of less public redefinition of risk appetite from competitors. Once we have developed a more complete picture from Lloyd’s syndicates, we will provide a more detailed overview to our clients. 

Whilst a large amount of insurance and reinsurance business is still transacted at 1 January, it is not the be all and end all for the markets.  The main Japan and Florida reinsurance treaty renewal dates, both geographies having suffered natural catastrophes in 2018, are April and June / July.  Also, there is dislocation in the market for retro business (the reinsurance that is bought by reinsurers) and some difficulties for non-traditional reinsurance markets than could manifest as capacity shortages as the year progresses. Many of the underwriters that we have spoken to expect that the market could tighten more as the year goes on.

We shall report further as the year develops.