A pre-renewal silence as deafening as the chorus of the tree frogs
On any typical mid-November trip to Bermuda, you might well expect to hear the perennial reinsurance lament that "the renewals are running late" echoed during meetings.
But this post-pandemic year is far from typical, and this year instead of talk about running late, people were highlighting how the starting gun has barely been fired.
Of course this is a bit of an exaggeration: reinsurance submissions are flowing and some of the first retro renewals may be finally moving closer to progression, but the general lack of quotes, even on flagship programmes, has everyone slightly on edge.
What to take from this overall eerie silence, as deafening as the chorus of Bermuda's tree frogs?
Firstly, it reflects a pincer crush on catastrophe reinsurance in particular – reinsurers are uncertain over how much more their retro might cost and how different their programmes might look as earnings-level cover is set to dry up, which in turn impacts their risk appetite.
But fundamentally many are also looking to make changes to their net books as well: carriers such as Axa XL, Axis and others are signalling an ongoing retreat from this particular source of volatility.
The general lack of quotes, even on flagship reinsurance programmes, has everyone slightly on edge
These shifting strategies are naturally taking their toll on the pace of renewals as companies need time to reconfigure their plans and transmit messaging on targets to staff.
It also reflects the particular opacity over the outlook for capital inflows. Ironically, last year's fundraising market was far more vibrant on the private equity side on the back of expected Covid dislocation, yet arguably this year when there is no sign of start-ups, there is more real need for them, relative to 2020 at least.
But more capital is also the last thing reinsurers really want now, even if cedants do: carriers need the improved rate that they will be able to push through from demand outstripping supply.
Of course everyone wants to be on the right side of this equation - building the better portfolio through higher rates, without taking the pain of lost capital within their own company.
But that is by definition impossible. There will be winners and losers in the months to come, both in the reinsurers who lose ground with cedants and the ILS managers who shrink at pace, or conversely the newcomer reinsurers who get a better chance of picking up good business than they might have had before, and ILS managers who benefit from investors rotating their allocations.
It is almost time for Bermuda's tree frogs to quieten down for the winter, apparently - and so too reinsurance folks will be heading back to their desks after a couple of busy weeks of travel for the island.
But the humming silence emanating from reinsurance underwriting desks at present could still bode well in the long-term for the market if it sets the conditions for an ultimately healthier sector.