Prior to COVID-19, the (re)insurance industry was already facing a range of challenges. The widespread impact of a global lockdown added to this challenging market and created the potential for even greater volatility. For an industry founded on the principles of diversification, we are now grappling with the implication of the first globally systemic insurance loss.
In trying to assess a loss of unprecedented scope this spring, more than one educated guess put the potential for claims to develop in excess of USD 100 billion, along with financial market volatility wreaking havoc on the asset side of the balance sheet, followed by a lockup of the retrocessional market and widespread trapping of alternative capital.
As a result of these initial responses, the mid-year renewals were the epicenter of market uncertainty. Pricing was impacted and capacity tightened. The Guy Carpenter Global Property Catastrophe Rate-on-Line Index increased by 6.2 percent after incorporating mid-year placements, driven by a challenging Florida renewal, loss-affected Japanese pricing and a cautious market environment induced by COVID-19. Despite this environment, all covers were placed and sufficient capacity was available.
As we look forward to January 1 renewals, some areas of uncertainty are diminishing, primary rates are increasing and new capital is entering the market.
Guy Carpenter Global Property Catastrophe ROL Index: 1990 to July 2020