The reinsurance sector has shown itself to be well versed at navigating market-changing events, and the overriding message following recent renewals is that the market remains well positioned to support insurers through the current period of uncertainty and volatility.
For more than a decade — starting in the mid-2000s — insurance pricing steadily declined, even amid significant economic and enterprise growth. In late 2017 and 2018, however, commercial insurance pricing started to increase, according to a report from Guy Carpenter-affiliate Marsh. And in 2019, the market began a rapid transition driven by an increase in claims severity and frequency.
Pricing increases are now being seen across most lines of business and in most geographies. This includes the United States and Canada, where the most substantial increases are occurring in property, directors and officers liability (D&O), auto liability and umbrella/excess liability.
With considerable uncertainty about insurers’ ultimate COVID-19 losses and double-digit price increases becoming the norm, the market is expected to remain challenging for some time. All buyers with upcoming renewals should be prepared for greater underwriting scrutiny and a more challenging process. Insurers may be more assertive in denying policy term extensions, paring back coverage and limits, applying exclusions and scrutinizing claims more stringently.
Guy Carpenter’s view is that the fundamentals of reinsurance remain strong: the sector’s capital base has been resilient to the recent financial market volatility and there are still opportunities in this environment for (strongly capitalized) carriers to offer new solutions and grow selectively into challenged lines.