Jan 2023 Reinsurance Renewals Review: A new market equilibrium

Africa – The 1 January 2023 reinsurance renewals have defied the odds of “come and go”, they have come and not necessarily gone. Some renewals were placed on “hold covered” position to be finalised in the first few weeks of this year while some have been extended by a month or so.

Although most of the 1 Jan renewals were finalised on time, the renewal season ran extremely late as cedants, reinsurers and retrocession markets worked to establish a new market equilibrium.

The African insurance and reinsurance market is largely a proportional buyer and, in many instances, the hardening of the global markets is less felt on the continent, however, this year, the hardening was somewhat felt as reinsurers offered less reinsurance commissions and offered renewals without many of the requested modifications in coverage.

Most non-proportional reinsurance programmes were renewed at higher pricing with an average of 15% on the primary market and 30% on the retrocession market. Continental reinsurers seem to have shouldered some of the hefty price increases from the retrocession markets as they successfully passed half of their price increases to the direct market.

The extreme pricing and coverage modifications that the reinsurers had hoped for did not entirely manifest in this 1/1 renewal as most African reinsurance buyers questioned and threatened to change their reinsurance buying philosophy in the middle of the renewal season.

Although the market hardened, there was ample capacity in the primary market to complete placements with some programmes reaching written lines above 200%. The retrocession market capacity was somewhat eroded; however, available capacity was enough to complete placements albeit from lesser rated markets than what the cedants had hoped for.

The Political Violence and Terrorism class of business was unsurprisingly the most challenged class at 1/1, both on treaty and binder basis. Most reinsurers withdrew their capacity, which resulted in the shortage thereof. The scarcity of capacity resulted in some binders not being renewed, halving of underwriting limits, as well as adjustments in pricing, attachment and coverage.

The imbalance of supply and demand in property catastrophe also contributed to a stressed market and, in some cases, led to pricing and structural changes “unsupported by technical considerations” and with unsustainable outcomes.

Other classes such as Financial Lines, Miscellaneous and Liabilities renewal outcomes were largely dependent on prior-year results, underlying rate changes, and overall portfolio performance. Some treaties managed to achieve improved terms and conditions.

Looking at the events of the Jan 2023 renewal cycle, it is clear that transactional brokers who do not take a leading role in strategic client advisory as well as shaping the market dynamics will face a challenging time that inherently threatens their existence. It is imperative that reinsurance brokers stay focused on providing workable client solutions, thorough negotiated coverage and balanced pricing for the long-term sustainability of cedants and markets. Maksure Risk Solutions has managed to provide a balanced approach to this 1/1 renewal.

“As reinsurers and retrocessionaires adjusted their underwriting approach, we at Maksure Risk Solutions worked closely with our clients to advise on remodelling reinsurance buying philosophy so as to protect capital and manage profitability. Our teams are now preparing for detailed post renewal technical discussions as well as work with our clients on finding alternative solutions, given the changing risk landscape,” said Simba Makwembere, Managing Director: Europe, Asia & Africa.

Contact our teams on Tel +27 11 805 0086 or Email: info@maksure.co.za.

About Maksure Risk Solutions

Maksure Risk Solutions is an Afro-Global independent specialist insurance and reinsurance broker with business footprint in Africa, Asia, East & Western Europe, South America and the Caribbean. We provide innovative and tailor-made risk solutions in Insurance and Reinsurance as well as Risk Financing and Actuarial Consulting geared towards capital management and strengthening our client’s balance sheet. Maksure is also one of the major players in Captive Management (Establishment & Management) in South Africa, Mauritius, Bermuda and various other jurisdictions. We have access into the Lloyds of London with a deep understanding of African markets. Our global nature ensures that our clients access quality capacity as well as some of the world’s latest thinking and solutions.