MakReview: Maksure’s 1/1 Market Insights

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We noted that the reinsurers were judgmental during the 1.1.2020 reinsurance renewals. This culminated to a large extent significant pricing, capacity and conditions variance depending on cedant’s past performance, class of business, geography, risk tolerance and relationships. There was also a significantly varying degree of interest and capacity available for direct business and retro business. Capacity was generally available in direct insurer’s treaty business compared to retrocession business.  This resulted in direct insurers treaties concluded in time while the retrocession business was concluded very late into the renewal season.

Key Insights

 

  • Reinsurers were judgemental leading to significant pricing, capacity and conditions variance depending on cedant’s past performance, class of business, geography, risk tolerance and relationships.
  • In the catastrophe reinsurance market, the effects of NatCats such as the Cyclone Idai in the southern African region was felt as reinsurers sought price adjustments for loss-impacted programs in peak zones as such as Mozambique. Facultative capacity was limited with reinsurers pushing for price increases and limiting cyclone coverage.
  • Continued interest of African reinsurance business by international reinsurance players was felt, however, the deployment of capacity by same was limited due to markets familiarising with the risks, building relationships and to some extent data quality challenges.
  • Underground mining and Agriculture business risk exposures continue to pose challenges as reinsurers have limited risk appetite for the class of business due to previous loss record. This challenge continues to be tropical as Africa’s economies are largely made up of mineral extraction and agriculture.
  • Capacity for retrocessional covers by international A rated markets has been in shorter supply as most reinsurers were derisking as they preferred to write direct business and limit their accumulation risk exposure. These shifting market dynamics culminated in retrocession rate increases and reduction in reinsurance commissions across several classes of business, albeit marked distinctions depending on performance, class of business, structures, risk tolerances and relationships.
  • Retrocessional capacity for clients that largely write from one country or region as well as those regions that protect against direct writing by international players was available at reasonably good terms.
  • On the balance the 1/1/2020 renewal season was a balanced renewal with those insurers with good performing books benefiting from good terms while those with poor performing books receiving penal terms.

“The African reinsurance market is undergoing some significant changes culminating from loss pattern changes, risk quantification strategies by international players as well as reinsurers’ risk appetites adjustments,” said Simba Makwembere, Managing Director of Maksure Risk Solutions. “These changing dynamics are expected to continue into the future and requires reinsurance brokers that elevates their clients’ risk management strategies to proactively manage loss performance, capability to quantity and model client’s risk exposures as well as deep technical capability and global relationships.”