Retro market disruptions may impact future renewals: Willis Re
Compiled by Insurance24
HARARE, Disruptions and trapped collateral in the retrocession market may have an impact on first-tier reinsurance property catastrophe pricing
levels over the upcoming 2019 renewals, according to broker Willis Re.
The analysis came as part of the firm’s latest 1st View report, which found that reinsurance rates at the 1 January renewals were generally flat to slightly down.
The report noted that some insurance-linked securities (ILS) products, such as aggregate catastrophe and retro covers, have performed poorly for investors and resulted in less available capital.
Willis Re said that retrocession renewals would be particularly challenging this year due to a number of issues that impacted capacity, pricing and terms, with heavy Q4 wildfire and hurricane losses, as well as deterioration of Hurricane Irma and Typhoon Jebi, pushing the renewal later than usual.
Another year of trapped funds to cover development of 2018 losses has also impaired inflows of capital and capacity from ILS investors, resulting in a ‘capacity crunch’ in the final stages of the renewals, the broker claimed.
This was particularly true of aggregate contracts, where reinsurers pushed back with increase pricing, higher deductibles and tighter terms.
The report also suggested that some ILS funds may struggle to attract new investors in the short term due to their exposure to certain product types.
While Willis Re does not expect this trend to continue in the long term, it represents an evolution in the dynamic between traditional reinsurers and ILS markets and a further dislocation between underlying reinsurance pricing and retrocession pricing.
For example, the report found that, for loss-free aggregate layers where cedants have trapped collateral from ILS incumbents, prices were higher than for loss-impacted occurrence layers where the traditional reinsurers were the incumbents.
Willis Re claimed that dislocation in the ILS and retro markets contributed towards the lateness of the renewal season in the U.S, but had little impact on reinsurers’ capacity and pricing across Europe.
This is with the exception of Nordic countries, the broker added, where uncertainty around retro capacity and pricing led a few reinsurers to downsize or pull out, and in the UK, where some reinsurers are showing less flexibility where reliant on retro.//ends Reinsurancenenews
What Agents Should Know About the Cryptocurrency Market
Cryptocurrency and blockchain entities may seem like a hot market for insurance agents looking to specialize, but right now there are not
many insurers willing to write it.
Before jumping in, agents would be wise to consider partnering with a wholesale broker with expertise so they can become familiar with the crypto landscape, according to Jonathan Reiner, an executive vice president at RT Specialty who works out of Chicago.
Reiner, who has been with RT since 2010, was at the PLUS (Professional Liability Underwriting Society) Conference in San Diego, where he spoke with Insurance Journal at the conference about the cryptocurrency market. This has been edited for clarity and brevity.
Insurance Journal: Talk about the crypto market and what insurance professionals should know about it?
Reiner: In general, from a D&O, E&O, cyber perspective, it’s a pretty hard market. There are very few insurance carriers that are interested in writing coverage for crypto- or blockchain-based companies.
Typically, it’s because they’re not familiar with how crypto works or the exposures that might arise out of it as well as the regulatory environment. It’s certainly a challenge for brokers just because there are only so many insurers that are willing to look at it.
Right now, the market is beginning to open up a little bit more. The insurance companies are trying to educate themselves by doing a lot of conference calls with clients, educate them on what their product offering is and then hopefully that continues to move in a trend where
insurance companies want to insure crypto or blockchain-based companies.
IJ: What makes crypto tough to place?
Reiner: It’s the uncertainty. You know, it’s the regulatory environment or lack thereof. Typically, there has to be some industry
precedent, right, and there just isn’t as much. So that’s been the biggest challenge and hurdle.
IJ: How would you recommend agents and brokers interested in getting into crypto go about doing that?
Reiner: I would say keep in mind partnering with a wholesaler and expert, somebody who can help guide you through what the marketplace looks like. You know, one of the big hurdles we’ve seen is oftentimes a retail insurance broker might have limited or no expertise in the crypto space. They might have a relationship and an opportunity and they completely under-ballpark what the cost might be or what the coverage might look like.
The private company, D&O marketplace right now in general is pretty soft, so I think a lot of retailers have gotten very comfortable with assuming that pricing is going to be incredibly cheap and terms are going to be extensive.
So when it comes to crypto marketplace that just isn’t the case. It’s because it’s a narrower playing field from the insurance company side.
There aren’t that many carriers in it. The carriers that are doing it are excluding a lot of things and charging a lot of money for it. So, I would caution the retail brokers that are targeting that business to make sure they know the landscape before they go after it.
There’s obviously a lot of emerging companies in the blockchain and crypto field. Because of that, there are more opportunities out there.//ends ..Insurance Journal
