January 2022 Reinsurance Renewals were mostly ‘Orderly’ but Loss-Affected Programs Saw More Challenges: Maksure Risk Solutions

Johannesburg – Although the major January 2022 reinsurance renewals came in late, they were pretty much ‘orderly’ and in line with expectations. Most of the renewals were concluded on time and contract certainty ascertained before the dawn of the new season according to Mr. Simba Makwembere, Managing Director at Maksure Risk Solutions.

There was ample capacity for both reinsurance and retrocession business on both proportional and non-proportional basis with new inflow of capacity largely from American domiciled capacity providers.  There is a sense that reinsurers have adjusted their risk appetite and pricing as most were cautious in their pricing and deployment of capacity.

Treaty programs that have performed well in the past were rewarded with flat/ unaltered terms. On the other hand, programs affected by losses or presenting greater risk to reinsurers experienced more protracted and challenging renewals, resulting in severe rate-on-line increases and restructuring of the attachment points. The Maksure Risk Solutions Property Rate-on-Line Index estimates a 11.2% increase. The Index tracks rate-on-lines on a number of property portfolios in southern and eastern Africa.

The facultative market showed signs of hardening with most accounts renewing at higher premiums and excesses.

Key insights from the 1 January 2022 renewals are:

  • Reinsurers are deploying merit based underwriting which involves underwriting each account based on a view of underlying risk, loss experience, claims performance, strength of management, business strategy, perceived adequacy of pricing and structure, and depth of the client relationship.
  • Capacity was generally sufficient to complete programs, with more market appetite for non-loss-affected programs. Property capacity was more constrained on lower layers and buy down covers particularly if loss impacted, as reinsurers reassessed risk appetite and inflationary impacts.
  • Capacity for specialist lines of business including Cyber, D&O, Underground Mining, PVT (certain territories and occupation) was also limited.
  • The January 2022 renewal process ran up to two and half weeks behind typical timing, which created a flurry of activity with two weeks left in the year. Key drivers of the late renewal season included cedant’s late submission of underwriting information, shifting risk views affecting pricing models and capacity allocations, uncertainty around trapped loss estimates and a very late retrocessional renewal.
  • Capacity providers continued insisting on the inclusion of Communicable Disease exclusions on renewal contracts.
  • On casualty business, portfolio performance and underlying rate movement were critical factors at renewals. Casualty renewals were generally orderly, with pressure seen in several pockets, including cyber aggregate, clash and loss-affected excess-of-loss programs.

Overall, the January 2022 renewals were ‘orderly’ and it is expected that the trend will continue into 2022.

For more info regarding our reinsurance solutions, contact our team 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

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