Reinsurance capacity was abundant in Australia but reinsurers were firmer in their demands on terms and conditions, notes Willis Re in its latest “1st View” report which covers current market conditions at key reinsurance renewal seasons.
The 1 July report says that in property reinsurance, any perceived rate discounts were immediately declined, and flat renewals more difficult to achieve. Rate increases, even on non-loss affected catastrophe layers, became more prevalent and a requirement for many reinsurers.
Willis Re highlighted other features of the Australian property reinsurance that include:
Reinsurers were prepared to cut capacity or decline renewals if perceived pricing adequacy was not achievable. This capacity could be replaced, but often with reinsurers waiting for improved terms.
A number of reinsurers actively sought to move away from loss affected lower layers and move further up the program.
Significant rate increases for subsequent event and aggregate covers, due to both significant loss activity and general reduction in reinsurer appetite for these covers.
Reinsurers focused on wordings and are reluctant to accept any expansions of coverage. Communicable disease exclusions became mandatory in order to complete placements.
As for the casualty reinsurance sector, the report says:
The Australian government reacted quickly to COVID-19 in both social distancing policies and economic support schemes. The OECD estimates a reduction in 2020 GDP of -5% for Australia.
Reduced activity & subsequent business closures led to reduced GWP for insurers across most Casualty Lines of Business. Claims activity is yet to fully play out, however some insurers anticipated an increase in small claims frequency for certain lines of business.
The effects of COVID-19 were a major discussion point in most casualty treaties. However, after thorough review of the underlying risk, reinsurers generally took a pragmatic approach to underwriting the risk as presented, based upon attachment point and line of business.
There were some instances of reinsurers seeking to limit their exposure to future COVID-19 claims and exclusionary language was imposed on some of the treaties designed to protect against systemic and accumulation risk.
Casualty rates and some attachment points continued to be under upwards pressure, with any perceived gap between technical rates and achieved rates an ongoing focus of reinsurers. Treaties with adverse loss development saw additional pressure on rates.
There was a notable shuffling of reinsurers’ shares on certain treaties with some relationships ending. However, for the most part, long term partnerships continued to be important to most reinsurers and buyers alike.