Global reinsurance sees one of the worst loss years on record

2017 is one of the worst year loss years on record for the global reinsurance market, according to a report by Willis Re, the reinsurance division of Willis Towers Watson.

According to the 1st View renewals report, catastrophe loss is estimated in the region of US$136bn for 2017.

These catastrophe losses are coinciding at a time when profitability in non-catastrophe lines is constrained and prior-year reserve releases are slowing.

However, the report says pricing corrections have not seen a significant spike due to the combination of strong reinsurance market capitalization, losses being split over a number of different events and the fact that a large tranche of the losses was retained in the primary market.

Key findings from the report:

• Catastrophe losses have stopped a further downward movement in risk-adjusted rates in most markets and classes.
• The continued supply of capital has helped curtail widespread increases in risk-adjusted rates on loss-free portfolios.
• Pricing across global property catastrophe and risk programs is seeing average adjusted increases of 0% to 7.5% with a few outliers either side of this range.
• Evolving cyber threats are a major concern for the industry in 2018. Recognition of silent cyber risk[1] continues to grow in the market with reinsurers trying to assess potential aggregation levels.
• Merger and acquisition (M&A) transaction volume in the global insurance sector finished 2017 on a par with 2016’s $49 billion.
• ILS investors have replenished their capital and continue to trade forward with modest spread increases for loss affected perils.

James Kent, global chief executive of Willis Re said: “No commentary on the January 1 renewal season can overlook the scale of human suffering and economic loss that the catastrophes in the second half year of 2017 have caused. The global reinsurance industry is central to alleviating the impact of the 2017 hurricane losses. The speed of claims payments from reinsurers to their clients has been exemplary and the value of reinsurance has been illustrated to many clients yet again. Clearly, the 2018 renewal season will for many reinsurers be a disappointment in terms of the rating levels achieved. However, this must be balanced against the ability of the market to provide buyers with the stability of capacity at reasonable prices with an orderly renewal process, which demonstrates the growing advancement of the market.”

He added: “As society as a whole is starting to look more closely at the role the global reinsurance market can play in helping to close the economic loss gap, the stability of the market bodes well for its future development.”