REINSURANCE RESET 2023: 1.1 RENEWALS IN PERSPECTIVE
It has been said that this was the first genuinely hard reinsurance market since 2006, putting relationships, leaders and organisations under stress. This year´s 1.1 reinsurance renewal season has been grueling for many, particularly as a series of events and rapid change in market conditions has meant that reinsurance capital has significantly contracted.
In the first The Voice of Insurance podcast of the year, host Mark Geoghegan chats to representatives from three of the top four reinsurance broking groups – David Priebe, Chairman of Guy Carpenter; James Vickers, Chairman of Gallagher Re and David Flandro, Head of Analytics at Howden.
The discussion brings the renewals to life by putting what happened into historical context while asking the big questions about who the winners and losers were, why this renewal season was so challenging, and what this means for the 2023 outlook.
We´ve cherry-picked some key soundbites from the podcast, but if you want to get a sense of the reset markets of 2023, we highly recommend you listen to this hugely informative and insightful episode.
The podcast starts by asking each interviewee to set the scene before going into much more detail and providing a summary of the renewal season.
Speaking first, James Vickers comments, “It´s been a very difficult renewal season and in many ways quite grueling for all participants, both buyers, and reinsurers, and I think the heart of the problem has been that there´s been a market reset.” James discusses how the reset has particularly affected short tail lines, property, and also some of the specialty lines. James argues that it is difficult for the market to find where the level will be whenever there is a market reset. Conversations in Monte Carlo, in particular, showed that the industry knew the market would be a little bit harder.
Summing up the season, David Priebe describes the renewal from Guy Carpenter´s perspective. “Depending on your perspective, one can say it was the best of times or it was the worst of times. In three words, the 1.1 renewals were tenacious, frustrating at times, and very challenging.” David discusses how the renewals were quite the process, with cedants and reinsurers trying to work to find a new market equilibrium in what was a very late and disjointed process, with the market starting to align around the Christmas break.
Asked to describe the market in three adjectives, David Flandro replies, “It´s hard to describe it, you know, with one or two words, seminal, acute, singular, erratic, late, unprecedented, did we say unprecedented, I don´t think we can, but I can still remember one of my mentors telling me don’t use the word unprecedented, it´s overused,” as both David and Mark agree that things can always get worse. David discusses that although the market has been through things like this before, this time round was unique and particularly late.
Given this singular backdrop, how did the market perform, were gaps left, were covers abandoned, and were clients left high and dry? Did the market clear as it should?
David Priebe replies, “It ultimately cleared properly, and ultimately I think we were able to achieve the critical coverage requirements that our clients wanted and preserve the integrity of the reinsurance product.” While David Flandro said, “Ultimately, the market cleared and realigned at January 1st. It was pretty hectic and crooked road getting there… but ultimately we got there, and we cleared.” James Vickers opines that “I think at the end of the day, it held up reasonably well, and what we found was that the push that some reinsurers were having towards named perils only didn’t really succeed.”
With a view to the future, how will this renewal impact 2023?
“I think it´s difficult to say generally,” replies James Vickers, “I mean, the most important thing is that it´s going to be much easier to manage clients´ expectations because there´s now some clarity. We´ve had this difficult reset, and the fact that everything was terribly late, the market found its clearing price, so I think the renewals will be much more orderly because everybody knows where we´re coming from.”
Enjoy the podcast.