NEWS
Expect a delayed renewal
Cautious cedant confidence at Monte Carlo has been replaced by overt caution at Baden-Baden: E&S.
The 2023 reinsurance renewals will almost certainly run late. Cautious cedant confidence at Monte Carlo has been replaced by overt caution at Baden-Baden, a key German reinsurer has indicated.
“For the moment it looks a bit delayed,” the chief executive officer of E&S Rück, Hannover Re’s reinsurance unit for the German market said.
“I had the feeling at Monte Carlo that everybody said there is a rush for capacity,” said Michael Pickel. Capacity was said to be constrained and demand currently looks to rise, as much as €1 billion for German nat cat, according to E&S Rück. “But until now I have not received any renewal information.”
Challenges to the renewals process have not abated and the issues that may have dominated Monte Carlo may now seem submerged under a rising flow of concerns presented by reinsurers.
Those concerns, focused largely on increases in long-stagnant retentions to counter the impact of inflation, may have slowed down what would have been a steady march towards a pricing exercise in years prior.
Cedants, feeling comfortable with retention points they’ve had in place for a decade, might now be stumbling in early efforts to recalibrate.
“When we come to the quotations, many alternative quotes will be requested,” Pickel said of the pending process and its capacity for delays. “The complexity will increase.”
E&S Rück vows not to be a source of market delays. “We’ll price whatever comes,” Pickel said, with warning that cedants “may just learn that the structure is not cost-efficient”.
“We are certainly looking at policy wordings.”
Michael Pickel, E&S Rück
But the process may be causing logjams at points in the pricing exercise. Pickel speaks loosely of broker chatter that some reinsurance rivals are unable to quote some structures on account of their own struggles to secure retro cover on an equally tight and pressured market.
“Some do not quote because they are so highly dependent on retro,” Pickel said. “Maybe this is a part of the problem.”
The challenge of inflation may have pushed some cedants to hold their cards close to their chests ahead talks in Baden-Baden, E&S Rück managing director Jonas Krotzek added. Among the first warnings issued to the industry ahead of Monte Carlo was to know your own inflation story, and how it hits your books and impacts strategy.
For E&S Rück, pricing and retentions will lead the concerns. E&S Rück will not be joining the reinsurer chorus demanding separations of perils and a move to named perils. “Prices and retentions,” Pickel said of priorities.
More important than a separation of towers among named perils would be a proper look at exclusions. “We are certainly looking at policy wordings. For us pricing is key.”
E&S Rück goes into the renewals routine without excessive growth ambitions to fulfil. Pickel says his firm is “ready for growth” with the capacity on hand to take business. But E&S will eventually face a “glass ceiling” as its market share has pushed some of its cedants to counterparty limits, he said. “But I hope we can post nice growth and diversify.”
Hannover Re writes reinsurance on global markets to the exclusion of its home German market, where it hands the baton to E&S Rück, a single-market unit it co-owns with a swathe of German mutual companies and for whom it acts as lead reinsurer.
Main image: Shutterstock / Ekaterina Pokrovsky
