The cost of doing reinsurance price rates rose by as much as 200% during the renewal season, according to a new report by Gallagher Re.
This year’s renewals took place against a backdrop of spiraling inflation, large losses from NAT CAT events, and the war in Ukraine. All these factors have combined to define a renewal that James Vickers, International Chair of Gallagher Re speaking to the FT, described as: “the toughest since 9/11”.
Aerospace has had a particularly difficult year, as businesses and insurers in the sector navigated a route through the fallout from the Ukraine invasion, which was reflected in Aerospace reinsurance rates rising by between 150 to 200 per cent.
This rate rise was driven by the price adjusting for past losses due to inflation, expected payouts from stranded planes along with the ongoing legal battle with leasing companies over compensations for planes in Russia.
Globally, property cat reinsurance increased by 37% globally in the January renewals, the largest rise in comparable data since 1992 according to a market report by Howden.
However, rate rises have not only been affected by external events but also driven by capacity issues, with the FT noting that some reinsurers have pulled out of property cat reinsurance, creating a capacity issue there.
In their report, Howden described the current reinsurance market as: “one of the hardest reinsurance markets in living memory”.
Moves by reinsurers to restrict or modify their coverage may well force many ceding insurers to write “net,” and forgo outwards reinsurance purchasing.
This activity has worried many including Guy Carpenter, which, as the FT reported in its market update threatens to: “erode the core value of the reinsurance product.”