USA. March 26. Heightened and ongoing uncertainty facing the reinsurance sector and the fact reinsurers have responded by shifting their views of risk is set to drive further rate increases and should make the gains already secured more sustainable, according to analysts at Morgan Stanley.
With the April 1st reinsurance renewals looming and thoughts already on pricing for the mid-year signings in June and July, the analysts looked at some of the catalysts that have driven market dynamics and rates over the last few months. One important factor that we’ve documented throughout recent months is the fact that, unlike other periods of reinsurance price firming, capital availability is not an issue driving market trends, this time around.
Recovering from the initial investment-side hit, underwriting firms have since then been able to increase their capital base with fresh raises, while still returning some capital to shareholders in many cases.
Fresh capital raising totaled some $20 billion in 2020, according to Willis Re, as we documented yesterday. Which led to the traditional reinsurance industry hitting the January renewals this year with perhaps more capital available than a year earlier, while the insurance-linked securities (ILS) market was also fast recovering and much less affected by trapped capital than people had assumed it would be.