Market balance

Maintaining discipline as the market returns to balance: Willis Re’s Vickers


James Vickers, president of Willis Re International, said that “the discipline is still there” even though the latest edition of Broker 1st See the report shows that recent increases in reinsurance prices have brought the market closer to equilibrium.

Speaking in an interview with Reinsurance News, Vickers noted that the reinsurance market “begins to balance itself more in terms of supply and demand and pricing” after renewals in mid-June and July.

Willis Re is 1st The View report noted a continuation of rate increases over the renewal period, with very few examples of reductions, despite increases perhaps not as high as many reinsurers hoped.

“It’s kind of a continuation of what we saw at 1/1 and 1/4,” Vickers told Reinsurance News. “But as long as it strikes a balance, reinsurers don’t back down. They still benefit from rate increases on the underlying activity.

And at the same time, discipline among reinsurers has remained strong as they continue to aim for improved underwriting ratios into the 1990s, and as challenges remain due to the low interest rate environment.

RMS

“While they’re all about growth, it’s not growth at all costs,” Vickers noted. “So the underwriting discipline is holding up right now. “

Overall, several factors combine to moderate rate hikes during the mid-year renewal period despite the best efforts of reinsurers.

These included good first quarter results for reinsurers, generally low catastrophe losses, increasing underlying reinsured premium volumes, positive investment trends and the strong economic recovery following economic pressures from Covid-19.

Capacity also remained more than sufficient to meet demand, but Willis Re noted that reinsurers resisted the temptation to compete for blue chip revenues, so capacity for underperforming classes was limited.

“At the end of the day, the reinsurance market is capital driven, and it’s in a very strong capital position,” Vickers commented. “Despite the turmoil of last year, capital ended up being slightly larger at the end of the year and capital remains more than adequate. And there is no reason why there will be a capital collapse anytime soon. “

“There is arguably little on the supply side to justify rate increases,” he noted. “But also, I think the focus on results is there. Revenue growth is good, but underwriting profit from the bottom line in the current low interest rate environment is crucial. And I think it’s going to stay that way for a while.

Surprisingly enough, Willis Re reported that worries about inflation and COVID-related losses had almost no impact on prices at 1/6 or 1/7, with rates either fixed or slightly increasing for them. property renewals.

On the COVID side, Vickers said prices haven’t changed just because “people haven’t paid a lot,” although he acknowledged that pandemic losses could still influence future reinsurance renewals as more complaints are settled slowly.

“Conversations are intensifying between cedants and their reinsurers seeking a settlement. And we’ll see how it plays out, ”he told Reinsurance News. 2But I suspect that if we see any trade compromises or deals to be worked out, it will be on the short-tailed classes. So we might start to see some kind of price impact as of 1/1 2022. But it takes a long time to catch on, and it’s by no means clear what the final claims will be.

“It is very likely that a large part of the settlements are made on a private commercial basis. But the one that is furthest away, let alone certain, are the COVID allegations on the long-tail classes, ”Vickers warned. “Everyone is talking about it and there must be complaints, but they haven’t arrived yet. And that’s even on the primary side, not to mention how they might filter through the reinsurance market. “

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