GC’s Priebe: Reinsurers’ reluctance to provide quotes created “late and fragmented” renewal

A combination of reinsurers’ inability to provide timely quotes and their demands for significant coverage changes contributed to a late and challenging 1.1 renewal, Guy Carpenter chairman David Priebe told The Insurer TV, with even some of the best relationships with cedants tested.

Guy Carpenter has characterised the 1.1.2023 renewals as one of the most challenging reinsurance markets the sector has experienced.

Talking to The Insurer TV, Priebe elaborated that reinsurers’ actions contributed to a late renewal.

“We knew that 1.1 renewals were going to be very challenging at the outset,” the Guy Carpenter chairman said.

“But they were made more challenging as markets were reluctant to quote early on, which really pushed our timing out. Overall, it was more taxing than expected from the fall meetings but [they were] a good success when it comes down to it.”

Priebe said it was clear at the outset that price and attachment points, particularly for property renewals, needed to move.

“This was really well messaged by reinsurers,” he said. “But the inability of many reinsurers to provide timely quotes and the degree of coverage changes when the quotes were finally provided, that wasn't anticipated. This created a late and fragmented renewal process.”

In a briefing issued at the end of 2022, Guy Carpenter reported that reinsurers presented fractured views at the start of the renewals process, with more extreme coverage modifications threatening to erode the core value of the reinsurance product.

Priebe commented that the lateness and the inconsistency of these requests were problematic.

“Ultimately, renewals largely came together in the closing days of the year, with less non-concurrency than expected in, say, mid-December,” he said. “The majority of placements were completed at client firm order terms, and those terms included material adjustments in price and structure as dictated by the market.”

“Some of the best relationships were tested”

Priebe identified mixed behaviour from different reinsurers, but said the conversations were “constructive and very positive” in the majority of cases.

“There were very difficult conversations at this renewal and even some of the best relationships were tested but overall we have a healthy reinsurance market,” he said.

However, he added some reinsurers may have damaged relationships with cedants through their actions.

“There were a few outliers, and the behaviors of those outliers have likely jeopardized their long-term relationships and would have potentially impaired the value proposition of reinsurance if their coverage requests were achieved,” Priebe said.

Property was the most challenged sector at 1.1, with a stressed market driven by the imbalance of supply and demand. Guy Carpenter in its briefing had said that in some cases this led to pricing and structural changes unsupported by technical considerations.

In other classes, underwriting requirements were widely varied, the Marsh McLennan subsidiary reported.

In casualty, treaty results were highly dependent on prior-year results, underlying rate changes, and overall portfolio performance, with pressure on pricing seen across most lines. Guy Carpenter said that capacity was stable across most casualty lines with very little change in terms and conditions.

Looking ahead to the mid-year renewals, Priebe highlighted that many June and July renewals experienced significant adjustments in 2022. He added that at 1.1.2023 some of the most extreme adjustments were driven by shortage of supply, and not necessarily risk-adjusted technical pricing.

“So we hope and expect that that should smooth out,” he said. “That's not saying that the June and July renewals will not experience upward pressure, but I don't think it will be nearly to the degree that we experienced in 1.1.”

Watch the 17-minute interview with Guy Carpenter’s chairman David Priebe for further intel on the dynamics at the 1.1 renewal, including:

  • Key areas of focus for reinsurers at the 1.1 renewal
  • How the renewal for lines outside of property played out
  • Where risk-adjusted rate increases landed for NA, Europe and Asia
  • Impact of growing risks such as inflation, climate and geo political turmoil in 2023