Jan. 1 Reinsurance Renewals Show Market Changing, But Not Yet Hardening

Only catastrophe-exposed and loss-affected reinsurance contracts experienced any significant upward movement in rates at the Jan. 1 renewals, according to one top executive.

During a Jan. 3 conference call, Aspen Re CEO Brian Boornazian said the “insurance and reinsurance markets are starting to accept the need for change,” as the markets start to recognize that the risks taken need more rate for adequate returns.

However, more change is needed “to reach rate levels that are adequate for exposures and other external factors that affect our industry’s profitability,” Boornazian said from Bermuda.

Several signs—high catastrophe losses, the release of RMS Version 11.0 and low investment yields—point to the formation of a hard market. Boornazian says the market began to harden only in certain lines at Jan. 1 renewals, but it is “not a classic hard market.”

According to Aspen Re’s head executive, rates at Jan. 1 renewals rose between 7.5 percent and 15 percent for larger property insurers and excess-and-surplus lines writers in the U.S. More increases were seen on contracts affected by losses.

Turning to Europe, the renewal season for property business saw only low-single-digit percentage increases, Boornazian said.

In Asia, January is not a significant time for reinsurance renewals. Real change here is needed, Boornazian said during the call, but “early signs are that we will see inconsistent corrections.”

Rate improvements in casualty reinsurance “remains elusive” internationally, he added, but the U.S. casualty market saw pockets of rate increases in response to contracts with loss development, “and very limited requests for rate decreases.”

In a Jan. 1 report, independent reinsurance-brokerage firm Holborn says U.S. reinsurance programs with rate increases outnumbered those with decreases over the last year.

Primary rates in the U.S. have been rising.