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3rd March 2021
S&P Global reports says reinsurers were left wanting more despite global reinsurance pricing gains at January renewals
During this year's January renewals, global property and casualty reinsurance rate increases were good but came up short of a hard market, and expectations remain high for the rest of the year. In a commentary, "Reinsurers Left Wanting More Despite Global Reinsurance Pricing Gains At January Renewals," S&P Global Ratings said reinsurers raised additional capital in 2020, which appears to have bolstered cedents' negotiating power and limited pricing upside. However, it wasn't all about pricing, tightening terms and conditions were the talk of the town.
"We believe that the global reinsurance sector didn't earn its cost of capital in 2020, as it has struggled to do so in the past four years due to COVID-19-related losses, large natural catastrophe losses, adverse loss trends in certain US casualty lines, and fierce competition among reinsurers exacerbated by alternative capital, which over the years has eaten up margins in the property catastrophe line of business. As a result, our sector view of the global reinsurance sector remains negative. We may revise our outlook back to stable if we believe the sector can sustainably earn its cost of capital.
In 2020, the top 20 global reinsurers incurred about $15.5bn of COVID-19-related losses (mostly incurred but not reported), with many reinsurers yet to report their fourth-quarter earnings. "However, we believe that, given the combination of pandemic losses, elevated natural catastrophes, other insurance losses, and lower reserve releases, the sector will swing to an underwriting loss for the year."
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