P&C insurance is proving its value as a good diversifier for reinsurers, especially given the positive trend in primary rates seen in recent years, according to an Aon report.
The combination of a difficult real estate experience, high levels of primary accident rates and thoughtful management of original limits make P&C insurance a worthy diversifier for reinsurers, the July edition of Aon’s “Reinsurance Market Outlook”.
The report provided a summary of the themes that existed on many accident renewals in July 2021, which included the following:
- The P&C quota market has been reinvigorated by new capacity as well as many long-standing P&C reinsurers aiming for growth given current market conditions with tightening rates. However, although they continue to support accident quota shares significantly, some historically larger authors have taken a more cautious view of the underlying trends that have limited the desire for meaningful growth.
- The capacity of stop loss programs depends on the performance of the program and is not as readily available as support for proportional investments.
- The pro-rated environmental capacity remains strong, despite comparatively lower original rate increases than some other P&C lines. Stop loss capacity is largely price dependent and less diversified.
- Professional civil liability has also seen a sharp increase in the capacities available on the market. Improved sales commissions and multi-year capacity are obtained during renewals.
- The capacity exists for pro-rated and excess of loss medical programs, although reinsurers remain cautious.
- Insurers take more of their investments on a net pro rata basis, supported by steep rate hikes on the underlying business and greater convenience with reduced gross limits in their portfolio. With respect to future renewals, continued demand is likely for stop loss and hybrid investments.
- Reinsurers continue to refine the pricing methodology for lower layer excess loss programs. The volatility of performance between programs has created more scrutiny of individual investments at these levels.
- The ad hoc clauses specific to reinsurers have been able to be standardized in certain cases given the capacity available in many lines of damage.
- Communicable diseases are no longer the dominant topic of discussion with most markets.
- The London market is navigating the UK regulatory requirement for all re / insurance companies – Lloyds and non-Lloyds – to have contractual clarity on cyber coverage / exclusion as of July 1.
- Social inflation continues to be a concern for the reinsurance market, which is potentially exacerbated by the pressures associated with the backlog. The cases of iconic victims will resume their work in the legal system and test political language. Given speculation about the acceleration of civil liability in a “post-COVID-19” environment where economic disparities appear to have widened, reinsurance remains an important source of capital for insurers.
- The assessment of liability accumulations is a growing concern for insurers.
- While there are many emerging / emerging risks on the radar, opioids and PFAS continue to dominate discussions, with wildfires remaining a central concern.
- Clash coverage remains available, despite a difficult year for some programs. New buyers are studying traditional coverage and exploring the design of non-traditional programs.
Aon’s Reinsurance Aggregate report analyzes the following companies: Alleghany, Arch, Argo, AXIS, Beazley, Everest Re, Fairfax, Hannover Re, Hiscox, Lancashire, Mapfre, Markel, Munich Re, QBE, Qatar Insurance, RenRe, SCOR, SiriusPoint, Swiss Re, and WR Berkley.
Aon Property & Casualty reinsurance
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