Although a combination of tangible and intangible difficulties have created one of the most dynamic and volatile landscapes in recent market history, reinsurers still show resilience and adaptability, according to Guy Carpenter. This was discussed by panellists at Guy Carpenter’s virtual media briefing, Moving Forward, which examined evolving market conditions, capital developments, and motivators of growth and change. Led by Lara Mowery, global head of distribution at Guy Carpenter, the panel began by exploring pricing trends in 2021. The first six months experienced continued firming of prices, while mid-year placements indicated moderating increases in average pricing. Speaking on the January renewals, Mowery comments: “Some drivers of uncertainty are dissipating. Primary rates are stabilising, while ample traditional and alternative capital is bolstering the sector. Reinsurers’ risk appetites and product offerings continue to evolve in response to emerging market realities, and differentiation remains valuable.” Sebastian Cook, managing director, head of London Europe, adds: “The US property catastrophe rate-on-line (ROL) index increased by 6 per cent for renewals from January through July, approximately half of the increase experienced over the same period in 2020.” Cook continues that overall ROL levels were affected by upward shifts in retentions (particularly on loss-impacted programmes) and increased pricing, while broad concerns about exposure from secondary perils and climate change were partially offset by increased capacity. In terms of casualty, Christopher Ross, managing director of treaty broking, affirms that casualty lines were similarly impacted by retention increases, coverage restrictions and a greater emphasis on client risk management strategies. Discussing a more general perspective of resilience within the reinsurance sector, Shiv Kumar, president of GC Securities, identifies the strength of the capital markets and catastrophe bonds, predicting that “the 144a catastrophe bond market is on track to have a record issuance year.” He says: “In the first six months of 2021, we saw US$7.9 billion in new bond issuance via 27 different transactions for 26 unique sponsors. First-time bond sponsors included reinsurers and Florida domestic carriers, as well as mutuals and corporates.” “Public entities and risk pools have executed fairly substantial catastrophe bond transactions. Also, a growing number of reinsurers are exploring this market as an efficient substitute for retrocessional capacity through aggregate industry index-based structures,” adds Kumar. These increases are attributed to the increasing role of environmental, social and governance (ESG) principles as climate change and other environmental risks persist as important concerns for organisations. “ESG has become a topic at the top of many company agendas, driven by expectations across an array of stakeholders, including investors, regulators, ratings agencies, employees and clients,” says Jessica Turner, managing director, catastrophe advisory. “At Guy Carpenter, we are able to advise on the expectations of investors, rating agencies and regulators with regard to ESG, identifying what good looks like and helping companies develop strategies to manage the transition toward their own net-zero targets,” Turner adds. The session concluded by identifying cyber risk as a fundamental driver of change in the reinsurance sector, with Erica Davis, managing director and global co-head of cyber, describing 2021 as “the year of change” in the cyber insurance market. “Across the industry, loss-development assumptions for cyber risk are again being revisited in 2021, to reflect the effect of the current claims activity. A higher propensity of cyber incidents (particularly ransomware attacks) is likely to hinder a near-term reversal of claims-cost trends,” she concludes.
