Reinsurance price hikes and capacity changes are not reminiscent of prior hard markets, participants said in quasi-Rendez-Vous meetings, with some going as far as to say that current price changes are not enough to keep up risks.

Executive Summary

While at least one rating agency report, published by Fitch in early September, stated that the "reinsurance market has entered into a hard market," market participants weren't quite on the same page. Reinsurance company executives and brokers did agree that "hardening conditions" are widespread, but company executives speaking publicly on virtual media events that also took place around the usual time of the Rendez-Vous de Monte Carlo gathering bluntly said reinsurance price increases must continue in 2021 and perhaps beyond. Brokers said reinsurers are choosing their spots, with rational approaches to individual clients still overshadowing broad-brush rate hikes or tight contract terms of a "hard market."

All agreed that hardening is needed, however, with most pointing to the same trio of drivers that Torsten Jeworrek, CEO of Munich Re’s reinsurance business, outlined at a virtual press conference: the erosion of industry prices over the last dozen years; higher loss activity from catastrophes, large manmade losses and social inflation; and significantly lower interest rate levels in most major markets.

“All three factors…lead to this hardening, which is, I think, undisputed at this time,” Jeworrek said.

Hamilton Re Chair David Brown said the driver of this market “is not just COVID. It’s been coming for years in many lines of business. We’ve been in a soft market for several years. People have been probably underreserving or too optimistic in their pricing.” Adding to that is the fact that interest rates are at historic lows, which is diminishing the ability of insurance or reinsurance companies to earn a return on the float. And then social inflation. “All those things have been going for many, many years. And then in the last five, we’ve had two of the worst cat years of record for natural disasters…”

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