The June 1, 2020 renewal is the first genuine test of the reinsurance market since the COVID-19 outbreak prompted government-mandated lockdowns across the globe. The pandemic has compounded an already firming reinsurance environment, resulting in challenged placements and pronounced property catastrophe pricing increases, particularly in Florida.
A preliminary analysis of risk-adjusted pricing data compiled by Guy Carpenter shows that most Florida cedents experienced double-digit reinsurance rate increases at June 1, 2020. Terms and conditions also tightened, with reinsurers imposing communicable disease exclusions and removing cascading features more broadly.
Driven by a focus to achieve an absolute communicable disease exclusion, many proposed wordings were so broad that they risked excluding otherwise covered losses such as hurricane or earthquake if there was any perceived (direct or indirect) contribution to the ultimate loss from communicable diseases. Guy Carpenter engaged with reinsurers and other industry groups to raise these concerns and achieved broad success in modifying language to ensure cedents did not inadvertently give up critical coverage. Other coverage restrictions did not materialize.
There was significantly less deployable capacity this year, as reinsurers were already refining Florida portfolios based on their new “view of risk.” The uncertainty generated by COVID-19 further exacerbated this dynamic. Differentiation between programs was once again significant, influenced by factors such as loss experiences, capital strength and perceived litigation/assignment of benefits (AOB) risks. Cedents who performed strongly against these criteria benefited from enhanced access to capacity and more favorable pricing and terms.
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June 22, 2020 at 12:01PM
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June 1, 2020 Reinsurance Renewal: The Impact of COVID-19 on Florida Property Catastrophe Pricing - GC Capital Ideas
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