Each year, Holborn tracks the price changes achieved for its client base for Mid-Year placements. The below information includes renewals from April 1 – July 1, 2018.
On average, Holborn’s clients achieved a 4% risk-adjusted price decrease for “Loss Free or Profitable” treaties – both working layer and catastrophe. The Lloyd’s market offered the most resistance to reductions. However, shares from any declinations or reductions from incumbent markets was filled by new capacity. Market support detailed below by each color indicating increased support (green), flat capacity (yellow), and decreases (red), year-over-year.
The significant catastrophe losses of 2017 (i.e., Irma, Harvey, Maria, wildfires) were largely viewed as tail events, with long payback periods priced into renewals by reinsurers, given abundant capital in the market. Year-end 2017 capital increased, despite $136Bn of global insured cat losses, due to:
- Capital market investor appetite remains strong
- Prior year reserve development is favorable
- Investment returns are strong
- Primary carriers retained a disproportionate share of loss
Trends in contract conditions included expansion of Hours Clauses, including reinstatement in the same event. In addition, more layers were placed with prepaid reinstatements. Reinsurers showed support of clients by fine-tuning exclusion lists and increasing sub-limits.