The new 1st View renewals report from the company puts loss estimates in the region of US$136 billion last year. Willis Re points out that the large catastrophe losses incurred in 2017 also coincided with profitability in non-catastrophe lines being constrained and prior-year reserve releases slowing. According to the report however, pricing corrections have not seen a significant spike due to the combination of strong reinsurance market capitalisation, the losses being split over several different catastrophe events over the year, and the fact that a large tranche of the losses were retained in the primary market.
The market was also significantly different for buyers in 2017, even when compared to other years with major catastrophe events. Willis Re’s report stated that traditional reinsurers remain strongly regulated and capitalised supplemented by insurance-linked securities (ILS) capacity, which has grown to $75 billion. The ILS market also showed resilience during the second half of the year, comfortably weathering the first major test for a number of funds with investors prepared to recapitalise funds and provide liquidity for trapped capital, according to Willis Re.
“No commentary on the January 1 renewal season can overlook the scale of human suffering and economic loss that the catastrophes in the second half year of 2017 have caused,” said James Kent, global CEO of Willis Re. “The global reinsurance industry is central to alleviating the impact of the 2017 hurricane losses. The speed of claims payments from reinsurers to their clients has been exemplary and the value of reinsurance has been illustrated to many clients yet again.”
Other key findings from the report include the evolving risk of cyber threats in 2018, the continued supply of capital helping to curtail widespread increases in risk adjusted rates on loss free portfolios, and that 2017’s merger and acquisition transaction volume in the global insurance sector finished 2017 on a par with 2016’s $49 billion.
“Clearly the 2018 renewal season will for many reinsurers be a disappointment in terms of the rating levels achieved. However, this must be balanced against the ability of the market to provide buyers with stability of capacity at reasonable prices with an orderly renewal process, which demonstrates the growing advancement of the market,” Kent added.