Feedback from the Rendez-Vous de Septembre conference is that reinsurers are cheerleading rising rates within the primary insurance market

By Jon Guy

The reinsurance sector met in Monte Carlo at the annual Rendez-Vous de Septembre conference last week, following a three-year hiatus due to Covid-19. During the three-day event, pricing dominated discussions.

Jon Guy

Jon Guy

Those who have attended this event over the decades will know that reinsurers are prone to use the gathering to talk up rates in the run up to the end of year renewals.

All too often, this has failed to materialise into higher premiums, but this year’s tone was subtly different - as was the message.

Fears over the scale, frequency and severity of natural perils has seen reinsurers shift capacity away from catastrophe covers and into the casualty classes. There is a recognition from reinsurance brokers that capacity is constrained and that programmes may have trouble finding the necessary coverage.

However, while reinsurers have warned that they are looking to charge a more technically adequate price for the risks they are being asked to assume, they are also looking to become cheerleaders for the primary market’s efforts to harden not only rates, but terms to limit exposures.

Naturally there is an ulterior motive for those calls, as a financially healthy insurer is more likely to be able to pay a higher premium for its reinsurance programmes.

The advice from reinsurance brokers to insurers is to get their business done early. This year, there is no advantage in insurers looking to leave their placements late in the hope that reinsurers will be more flexible on price if they have capacity to commit and the clock is ticking.

Upward rates

What reinsurers want to see is primary insurers pushing through rate increases, particularly in locations affected by extreme weather.

While competition remains evident, reinsurers are saying they will not look kindly on insurers that are not taking significant steps in today’s hard market – at the Rendez-Vous de Septembre, Fitch Ratings said hard market conditions are already here and will be in situ for some time. The hard market will be made worse if inflation has a continued impact on claims costs.

What this will mean for the UK market has yet to be determined, but all indicators point to the need for insurers to push rates - to not only meet reinsurers’ rising costs, but also to potentially look to take on higher levels of claims costs to keep larger retentions and counterbalance the cost and availability of reinsurance capacity.

Munich Re said that 60% of its treaty business is up for renewal on 1 January. To absorb inflationary costs and deliver premium growth, rates will need to see a 10% increase.

As always, the costs of doing business will invariably end up at the feet of the end customers.