Renewals
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The expected spend is around 33% higher than Twia had budgeted.
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The suggested update to the PML is $2bn higher than last year.
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The carrier also set out detail on its alternative solutions offering.
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European rates on line increased by 7.60%, while in the US prices were up 5.25%.
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The $7bn initial attachment point has remained unchanged from last year.
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Of $17bn that entered the market in the 15 months to 31 December, 40% was channelled into ILS vehicles.
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CFO William McDonnell said reinsurance market stabilisation in 2023 allowed the firm to buy more protection than expected.
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The broker’s report also hailed the best risk-adjusted margins for ILS investors in a decade.
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Competition for remote risk deals intensified as more capital has targeted the swathe of business that has historically been the heartland of ILS.
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The broker’s 1st View report predicted that cat bond issuance should remain elevated until at least Q2 2024.
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Reinsurers are making some adjustments to secure target signings but appetite to grow is finely balanced.
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Projected 2024 ILS returns remain historically high, but signs of increased appetite for top-layer cat risk and top-end retro raise questions over how long this will last.
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The TWIA board has fired the starting gun on the process to place its reinsurance programme incepting June 2024.
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The P&C Re CEO discussed Swiss Re’s P&C appetite and nat cat exposure in the investor presentation.
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The ILS sector grew in the context of 0% interest rates historically.
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Demand is expected to boost the ILS market growth.
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ILS capacity in the form of retained earnings and new inflows is shaping up to meet growing demand for reinsurance and retro coverage.
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The supply-demand dynamics are all pointing in ILS markets’ favour, so long as hurricane season goes quietly.
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Total reinsurance capital will climb to $560bn, ahead of last year but behind the 2021 peak of $570bn.
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The firm’s 1st View report on the July renewals also flagged that an oversupply of ILW capacity may bring down attachment points relative to early 2023.
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The broker estimated global reinsurance capital rose by $30bn over the first quarter, with a 7% uplift in alternative capital and a 5% recovery to traditional equity.
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The organisation bought $1.4bn of reinsurance at 1 April.
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This year’s program – sealed with a panel of 78 reinsurers – includes $875mn of multi-year ILS capacity providing diversifying collateralized reinsurance capital.
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Shifts in reinsurance appetite across the risk spectrum has squeezed out ILS providers in some cases.
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The pace of rate hikes will ease back from the 1 January reset as buyers seek to lock up capacity early after last year’s dislocated renewal.
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Aon expects depleted shareholder equity to be restored over time via higher retained earnings and the ‘pull-to-par’ effect of bonds approaching maturity.
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Cat bond pricing has fallen by about 12% since year-end but margins are still strong enough that the market could be set for meaningful growth, the broker forecast.
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The real test for cat capacity will come at the mid-year point, according to Gallagher Re.
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The cat bond market is thought likely to receive an outsized portion of any capital inflows.
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CEO Locke Burt said Florida reforms would be “transformational” and that investors had become more receptive to cat risk owing to higher rates.
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The US mutual cut back its 1.1 reinsurance program, according to sources.
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The ILS manager’s analysis highlighted that Lloyd’s nat cat exposure had lowered over the six years to 2021.
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The carrier has upped its global all-perils cat coverage to $1.2bn since January last year.
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The capital management platform remains active but January renewals were fronted by the balance sheet.
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The reinsurer noted “buoyant” conditions in the cat bond and private reinsurance segments.
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The carrier has increased its retro capacity by 56% to EUR1.34bn.
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The carrier said it achieved average risk-adjusted price increases of 30% on cat business.
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The headline market drop in AuM belies a more lively growth story for funds operating outside of the ILS major league.
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The organisation is preparing its reinsurance placement based on the increased exposure numbers.
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Rate increases achieved at 1 January will help carriers keep pace with inflation, the agency said.
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The carrier has renewed two of its quota shares with continental reinsurers with final negotiations underway.
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Key themes of the renewal that resonated across the ILS investor base include the elevation of attachment points, though lack of take-up of named perils coverage may disappoint some.
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The broker said the renewal had been “gruelling” for cedants.
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The European cat market is hardening faster than expected but the process is being delayed by ongoing negotiations over retro protection and varying lists of reinsurer demands to improve terms.
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The syndicate’s growth headroom is somewhat constrained compared to the Lloyd’s market average.
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High-yielding alternatives are taking away attention from this sector, with its complex narrative around recent losses, and diversification only goes so far in selling its story.
-
Expansion is set to be a trend across Lloyd’s as syndicates look to capitalise on a hardening market.
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The ILS broking leader was speaking at the first in-person Munich Re ILS roundtable at the Monte Carlo Rendez-Vous since the pandemic.
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The price for risk carrying is no longer insufficient, Munich Re's CEO said in a Monte Carlo briefing.
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Moody’s, S&P and Fitch all see current conditions as potentially allowing for ILS growth.
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Succeeding years of nat-cat losses have left aggregate and lower-layer capacity tighter.
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The deadline for Lighthouse Excalibur policy cancellations has been extended to 30 June.
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Reinsurers secured concessions on terms and hiked rates as most insurers managed to patch together cover to enter hurricane season.
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DE Shaw has been offering a form of “capacity wrap” to insurers in which its limit could be used to plug gaps throughout programmes, sources said.
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The chunky deal comes as many reinsurers are heavily cutting their Florida cat books.
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With reinsurance availability scarce and costs rising, several carriers have called an interim halt to new homeowners’ business.
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Some cedants remain far behind in a stressed renewal, but others are on the path to completion in a reshaped Florida market.
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Proposed RAP coverage layer adds protection and exposures for insurers.
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Several firm-orders have been released, but there are widespread expectations of a much-delayed renewal as low-layer capacity remains elusive.
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The Gallagher Re managing director of EMEA North and East said buyers need to be able to explain their stance on handling inflation, going beyond price to include action on their own underlying limits and deductibles, to get reinsurers on board.
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The $500mn of new demand from Allstate highlights carrier need for cover after Ida, but pulling together cat capacity in the peak US market remains a tougher ask.
-
Wind XoL rate increases are tapering off, while cedants push for commission increases on quake quota-shares.
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Scor said it had purchased the same retro limit as it had last year while managing “contained” price increases, as it cut back its catastrophe exposures.
-
RenaissanceRe had raised $470mn for the high-risk fund platform a year earlier.
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The industry is expected to improve its return on capital slightly in 2022.
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The French reinsurer’s vehicle has renewed for the fourth consecutive year.
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The Federal Emergency Management Agency trimmed its spend on the program by 12%.
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Many private deals featured in final renewals negotiations as overall cat risk appetite was cut back, with some ILS segments hard-hit.
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As the renewal is expected to spill over into 2022, the two-speed market will put pressure on retro-reliant carriers.
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The shortage of sidecar capacity could have a knock-on impact to broader renewals.
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This year, instead of talk about running late, people were highlighting how the starting gun has barely been fired.
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The retro renewals are barely underway, as a challenging fundraising environment and queries over loss experience has delayed the typical pace of progress.
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Its reinsurance premiums ceded are expected to reach $207mn, up from $175mn a year earlier.
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The retention was $80mn which will reduce to $55mn for second and third events.
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Willis Re international chairman James Vickers said that the ILS market played a strong role in the Florida renewals, but it was becoming more difficult to judge the overall impact of the sector as more capacity stays behind rated balance sheets.
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The broker said a buoyant ILS market contributed to the reinsurance market nearing a new equilibrium at the end of mid-year renewals.
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The news marks the second year in a row members have ceded more than $1bn in risk to the Caribbean Catastrophe Risk Insurance Facility.
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Total spending was up 2% as the Floridian carrier cut back the limit it bought by 10%.
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The organisation has $170mn less cover in place than the $2.1bn it had for the 2020 and 2019 hurricane seasons.
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Last year it secured just NZ$6.2bn of protection from major nat cat events, as premium spending went up by 11%.
-
The Florida reinsurance renewals ran more smoothly, with lower overall rate increases than initially expected.
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New and growing carriers helped to fill out treaties as Sompo stepped back from a market that came in flatter than expected for remote risk.
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The carrier cut back its treaty limit by around 13% and lowered its deductible.
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Divergence between appetite for upper and lower layer reinsurance risk may drive some panel turnover, and disadvantage some segments.
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Berkshire, along with some other expansive reinsurers, grew its level of assumed reinsurance premium from top Florida insurers significantly in 2020, as the ILS market share dropped overall.
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The company also procured approximately $180mn of incremental limit for earthquakes.
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Pockets of the distressed Florida market are still expected to face a challenging renewal, but much of the remediation was carried out last year.
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Reinsurers are still hoping to achieve double-digit rate increases, but brokers and cedants suggest this is unlikely against the context of strong reinsurance supply.
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Amid an April renewal that resulted in a slower pace of typhoon rate increases, ILS deals covering Japan have held up above historic lows.
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Reinsurance underwriters and brokers anticipate a Japanese renewal largely unaffected by Covid-19 as negotiations continue to focus on payback for 2018 and 2019 typhoon losses.
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The personal and commercial lines book will be folded into recently-acquired Centauri Insurance.
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Event definitions were also tightened at renewals, the broker said.
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The carrier predicts Covid’s reinsurance impact will drive market hardening.
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The French reinsurer reported average treaty price increases of 7.8% in January and predicted rate growth through to 2022.
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One estimate suggested around $2bn of new capacity in private deals.
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The reinsurer was chasing a high 15% net return target but said lower demand and capital trapping made this unachievable
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The carrier maintains its 2021 profit forecast amid 8.5% 1 January premium growth.
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But analysts added that slowing rate momentum suggested the hard market could end this year.
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The flood insurer cut just under $200mn of limit from its renewal, enabling it to pare back its outlay, although nominal programme-wide rates rose 13%.
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Limited new inflows supported the collateralised and sidecar markets as cat bond offerings attracted significant capital.
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Aggregate retro capacity has “reduced enormously” but rate increases were less severe than some had feared, the Willis Re international chairman said.
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Capacity was constrained but some ILS funds were able to grow, while cat bonds also propped up supply.
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New capacity and fewer problems with trapping contributed to a smoother renewal than some had expected.
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US cat renewals are outpacing European increases, but as signalled earlier this month, the level of rate hikes has fallen back.
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Costs outpaced the European benchmark rate change, but Covid loss negotiations have been deferred.
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Cedants and reinsurers perform a "slow dance" around pandemic losses, with claims negotiations deferred beyond renewal.
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A fresh BI ruling in Australia this week highlighted the industry's reason for caution over Covid exposure as legal actions continue.
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The carrier says higher retro renewal costs will act as a counterweight to rising rates.
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The reinsurers point to falling interest rates and loss experience as the basis for further hardening.
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Buyers are out early ahead of a challenging renewal, with retro rate hikes set to outpace reinsurance increases.
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Contingency losses will result in a total loss and an increased renewal cost.
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Retro structural change will provide a lot of the gains in 2021, with trapping negotiations complicating the mix.
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The carrier's Ada Re vehicle will join its Turing Re sidecar, but its capacity is not known.
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The CEOs of Aon Reinsurance Solutions, Willis Re and TigerRisk predict limited rate gains, but up to $10bn of incoming capital.
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The debate over how far Covid losses will escalate is not the only key to January renewal dynamics.
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As new PE inflows arrive in the sector, it remains to be seen how this will be matched on the ILS side.
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Insurers need to “be ahead of the game” on rate increases, company officials told Trading Risk.
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The insurer had previously confirmed details of its $4.5bn treaty renewal.
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Coronavirus is just one factor driving rate increases, (re)insurers said.
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The carrier has reduced its frequency risk while lifting exposure to tail events.
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The utility spent 13% more to secure its insurance but cut back third-party cover to $870mn.
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The French reinsurer guides away from an equity raise as it predicts further rate hardening.
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A number of major carriers have bought new catastrophe covers, but the overall gain is likely to be muted, brokers forecast.
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Cat programmes have been completed this year, but a heavy hurricane season could shake up the market, the broker said.
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The (re)insurer placed a new $100mn enterprise cover, ahead of the $350mn bond elapsing.
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Reduced exposures take the vertical limit on carrier’s cat programme down to A$6.5bn from A$7.2bn.
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Reinsurance capacity has largely bounced back from an initial Covid-19 hit, but the ILS segment remains more disrupted.
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The carrier’s latest treaty offers $1.01bn of cover, down from $1.24bn last year.
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An influx of underwriting capacity will likely limit the extent to which reinsurance rates rise, the agency said.
-
RoLs could rise moderately in July with stronger gains in January, market participants said.
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The early renewal approach has been met with opposition from Lloyd’s reinsurers.
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Limited mid-year trading has continued but buyers have cut back.
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The capital raise boosted Fidelis’ share base by 45 percent of pre-transaction equity.
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Avatar has increased the spreads on its new Casablanca Re bond just a week after hiking them by 16-18 percent.
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Trading was brought forward this year and more cedants could head to bond market.
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RPP covers, previously dominated by ILS writers, were one of the areas in shortest supply.
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The Florida-based insurer’s spend rose by 17 percent to $262mn.
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The carrier took a small co-participation on its first layer, effectively lifting its retention.
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Both tranches of Avatar’s second-ever Casablanca Re cat bond have had their spread guidance increased by 16-18 percent.
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The Covid-19 pandemic has caused greater turbulence in the Florida reinsurance market than Hurricane Irma, and two big questions will remain after the dust has settled.
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Multiple carriers had to revise official terms to get programmes home as reinsurers held firm on price demands.
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The FHCF opted to “sit this renewal out”, according to sources.
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Small increases on international cat treaties such as the New Zealand EQC are being welcomed by reinsurers, with US nationwide deals also rising by up to 15%.
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The agency predicted more companies would take action like Capitol's decision to shed policies.
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Reinsurers have held the line on pricing as cedants seek to close out deals, with the market showing further hardening.
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Reinsurers push back on aggregate exposure from cascading covers as market gets more differentiated.
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The ILS market is among the leaders in holding firm on exclusions.
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The carrier abandoned plans to do a new cat bond and boosted traditional cover on “better terms”.
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The carrier’s CFO said Florida pricing “could return to more rational levels” after years of underpricing.
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Uncertainty created by Covid-19 is driving demand, as insurers move to protect capital, Jean-Paul Conoscente said this week.
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Ahead of the renewal, Scor’s CEO had been pushing for double-digit rate increases in Japan.
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Early firm orders showed similar levels of increases to 2019, but are not expected to be a strong benchmark in a fast-changing market.
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The California body’s $900mn in bonds constitute 20 percent of unrenewed notes maturing before July.
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Underwriters will likely keep pushing for higher rates, the rating agency said.
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Willis Re said overall ILS share was stable, as some took advantage of rising rates in Japan.
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Sources have warned that the cat bond sell-off could restrict capacity in the upcoming Florida renewals.
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As per previous bonds, the transaction is fronted by Hannover Re.
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The carrier said it has already secured two-thirds of the private reinsurance limit it will place this year.
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The firm's cat excess-of-loss book rose 7.8 percent.
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The carrier contributed more than $100mn of the January intakes for its retro-focused Upsilon fund and the Medici cat bond fund.
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The CEA expects new revenue bonds could reduce its risk transfer needs by $300mn.
-
The manager has offered to repurchase up to 22.5 percent of its Reinsurance Risk Premium Interval Fund, well above the usual 5 percent buyback offer.
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The January 2020 sidecar renewal season could emerge as a turning point in the evolution of reinsurer ILS tactics and strategies.
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The insurer placed 35 percent less aggregate limit than in 2019.
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Intermediaries called the renewal “asymmetric” and “divergent” as rates began to move up after a pressured few years.
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Overall sidecar capacity has been cut by more than 20 percent, sources estimate.
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The funds raised for Eden Re II this renewal have reached $285mn down from $300mn last year.
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The deals include a $30mn aggregate and a $110mn all-other-perils deal.
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The deal may replace a $55mn sidecar listed this time last year, which sources said provided reinsurance for a short-tail property insurance book.
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Peak Re was able to increase sidecar cover for its global property reinsurance risk portfolio amid stalling ILS capacity this renewal.
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The reinsurance market has scrambled its way through the January renewal season in typical festively messy fashion – but in the sober light of New Year it will be mulling over several key issues that will set the trend for the rest of 2020, with change far from complete.
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The government secured a slight expansion in the level of cover obtained across the middle layer of the programme.
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Trapped collateral left overall capacity flat, despite a 5 percent increase in rated capital.
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Hyperion X estimated retro rates have risen to around 140 percent of their pre-Irma levels.
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The broker's chairman of international business James Vickers said reinsurers are only trimming capacity on the edges of the cat market.
-
The broker’s 1st View report highlighted diverging reinsurer tactics and segmented renewal outcomes.
-
The carrier renewed about a third of its $1.2bn earthquake cover.
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The reinsurer was among the blue-chip cedants to benefit from an earlier renewal and occurrence structure.
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Risk-adjusted rate increases have put returns back to 2014 era benchmarks, sources estimated.
-
The vehicle is a PGGM investment with Munich Re, complementing the latter's Eden sidecar.
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Underlying rate increases are ranging from 10-25 percent for US regional insurance binders.
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The main disrupted segments are still aggregate retro and sidecar vehicles, where negotiations over the level of trapped capital have held up the renewal process.
-
It is the first ILS vehicle to receive the credential from the FNG.
-
Any lack of retro support could push reinsurers to reduce their gross footprint in the Sunshine State, suggested Validus Re's Chris Silvester.
-
The provider said the losses were driven by the impact of Hurricane Dorian and Japanese typhoons.
-
Experts split on how far the mid-year renewals benefitted reinsurers.
-
The carrier is among the first P&C insurers to release anticipated loss numbers ahead of the third-quarter earnings season.
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The Amundi Pioneer fund’s value dropped to $819.9mn at the end of July.
-
A slew of new retro vehicles were mooted at the Monte Carlo Rendez-Vous and existing players are keen to expand.
-
The lift in ILW pricing seen at mid-year has been unilateral across most products and was a further increase on the 2018 pricing correction following 2017 events, according to Aon.
-
Aon’s plan to launch an auction platform in time for 1 January 2020 suggests a struggle is underway in the reinsurance space for the position of auction technology market leader.
-
Ratings agencies remain positive on reinsurers boosting their use of retrocession to grow, despite this year’s capacity crunch in the retro segment.
-
The aggregate recoveries were part of A$589mn overall losses ceded by the insurer to its reinsurers in the past year.
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Reinsurance buyers with a relationship-driven approach have come through 2019 renewals in better shape than transaction-based cedants.
-
Axa XL cut back revenues on property cat reinsurance business by 7 percent in H1.
-
The insurer increased its reinsurance spend by 10 percent in the quarter after adding $400mn top-layer coverage.
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The California-based carrier raised its retention to $40mn, citing high rates.
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The ILS unit has reached $1.6bn assets, as Hiscox’s reinsurance group was hit by 2018 loss creep.
-
The RenRe CEO also flagged changes to the firm’s purchased and written retro portfolios in mid-year renewals.
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The momentum for rate increases has built up in a delayed reaction to losses.
-
The rate increases were less differentiated than the 1 June Florida rises.
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Assurant is paying $165mn in premium for the 1 July reinsurance renewal, before tax, a 20.7 percent increase on last year.
-
The Lane Financial index has returned to levels not seen since 2012.
-
In a pleasantly warm Zurich this week, I was discussing one of the city’s traditions – burning the giant figure of a snowman to herald the end of winter and coming spring.
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Reinsurers that have been reliant on retro cover also pared back their market share, as the broker said mid-year renewals showed tangible pricing momentum.
-
The hedge fund’s participation drove an overall increase in ILS use by the Floridian insurer for its 2019-20 programme.
-
The insurer paid a rate on line of 11.25 percent for its new personal lines cover.
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Rates are believed to be around 15-30 percent up in the retro market, helping in turn to support increased rates in the Florida renewal.
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However, the verdict on whether Florida rate increases were enough to satisfy underwriters still seems a split one.
-
Some of the largest Florida carriers increased their reinsurance limits at this renewal, but they were able to keep control of overall expenditure by opting for more Florida Hurricane Catastrophe Fund (FHCF) protection.
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The state cat fund delayed its renewal to avoid clashing on the market with Florida insurers.
-
The company’s cover for a Florida storm now extends to $3.28bn – up $134mn from 2018.
-
A range of buyers have to use private deals to fill out orders, but the vast majority look set to be covered by the end of today.
-
A move towards more bilateral trades is counter to what you’d expect from a commoditised market.
-
The legislation now passes to the state’s Assembly.
-
Rising Jebi losses will contribute to a squeeze on capacity.
-
The insurer increased its participation at the Japan renewals in April.
-
The insurer was hit by $5mn of cat losses in Q1 2019, adding 2.4 points to the combined ratio.
-
Rates rose by almost 15 percent for cat programmes in the Japanese market, according to the French reinsurer.
-
The increase gives an early indication that reinsurers may be able to secure significant increases at this year’s Floridian renewals.
-
Reinsurers avoided another lacklustre renewal season with loss-affected business in Japan, the US and the retro market attracting rate rises.
-
The relationship between Florida insurers and their reinsurers is obviously going through a rough patch. It makes you wonder whether the role of brokers this year might be akin to that of marriage counsellors.
-
ILS managers are upping the pressure on Florida reinsurance buyers to change terms and conditions or retain more risk as 1 June renewal negotiations continue.
-
In the US April renewals, loss-impacted business rose by 5 to 20 percent.
-
Why has ‘payback’ become a dirty word in the reinsurance markets?
-
The state is “still a cash cow for reinsurers” as over the past decade the Florida reinsurance combined ratio has been running at 79-80 percent, according to the analysts.
-
The rate outlook from consultancy firm Raymond James is below the 20 percent-plus correction that reinsurers are pushing for.
-
Some reinsurers are saying their views of Florida risk have changed post-Irma.
-
The impact of Hurricane Irma loss creep is coming to the fore ahead of the June renewals.
-
After entering the market in loss-struck 2018, the pension fund was prepared to lift its allocations to Aeolus and Catco for 2019.
-
The $50mn ILS vehicle of Fidelis, led by CEO Richard Brindle, was launched on 1 June 2018.
-
The London-based insurer renewed its programme which includes 9 percent collateralised reinsurance at the start of 2018.
-
Third Point Re ended 2018 with a quarterly net loss of $298mn after suffering a net investment loss of $276.8mn.
-
In a note to investors Matt Carletti ranked catastrophe aggregate programmes as being set to see the largest price rises.
-
Catastrophes and large claims dragged Bermuda-based Hiscox Re and ILS to a $23.2mn loss for 2018.
-
The total is 10 percent more than the $400mn figure Brit disclosed for 2018.
-
The insurer declined to comment on how much limit of the EUR1.75bn cover was placed.
-
The reinsurer’s P&C unit fell to an underwriting loss for 2018 after $2bn of catastrophe losses.
-
This was up from the $623mn figure reported in its Q2 2018 results.
-
The firm said its maximum no-loss return was 30 percent, up from 23 percent in 2018.
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