Cedants have not changed approach to buying reinsurance after COVID losses: Moody’s
Large reinsurance buyers expect prices to continue to rise into 2022 across all categories, with more significant increases on loss-affected lines. However, cedants anticipate the pace of the increase to be moderate, or even slow to low single digits, as well as no change in their approach to buying reinsurance as a result of COVID losses.
This is according to Moody’s Reinsurance Buyers' Survey, which reveals that pricing growth will slow down to the single digit percentage range in 2022 across all lines, compared with high single digit or even double digit increases in previous years.
Buyers primarily attribute continued price increases to rising loss costs, and a realisation that prices were previously too low for the associated risk, the report noted. They expect the industry to keep pushing for higher rates.
The anticipated slowdown in price growth could reflect increased reinsurance capacity as underlying profitability improves. While large losses related to Hurricane Ida in North America could potentially give greater uplift to reinsurance prices than respondents previously anticipated.
A vast majority of buyers expect nat cat risks exposure to increase over the next three years, citing shifting weather patterns and climate change as possible drivers. Moody’s stated that this will result in insurers buying more reinsurance to mitigate the risk.
Buyers expect property reinsurance demand to go up given the increased nat cat risk, but foresee demand for casualty stabilising despite rising loss costs.
Furthermore, most cedants do not anticipate purchasing more cyber reinsurance coverage in the coming year, but do expect higher prices and tighter terms and conditions.
Interestingly, around 85 percent of respondents stated that although they incurred significant Covid-related claims across multiple insurance lines, the pandemic has not changed their overall approach to buying reinsurance.
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