Leaderboard

Very good news for Fairfax on the reinsurance renewal front. Cha ching... Here is RBC's Summary: January 1 reinsurance renewal observations: January 1 saw a banner renewal period for reinsurers. For property classes, it was a true hard market rate with property catastrophe reinsurance rates up +37%, the largest rate gain since 1992. Casualty and specialty reinsurance rates were up around mid-single-digits and far higher for loss-impacted accounts. Reinsurers were able to secure better terms & conditions (retentions, deductibles, losses covered) and held back capacity in some areas. A vintage year alongside 2013 and 2006. There are few times we can say this but we think reinsurers got what they wanted (and possibly even more) at 1/1 renewals. That may not be true in every line or geography but it was as strong an outcome as we have seen since at least 2013 and probably back to 2006. Howden reported that global property catastrophe rates averaged +37% at this past 1/1, which was the largest percentage increase since 1992 (post Andrew). For comparison sake, property cat rates were up a solid +9% at last year’s 1/1 renewal period. Howden also noted +45% average rate increases for direct & facultative business and +50% for retrocessional cover. For casualty and specialty lines, it was more of a routine and normal renewal period with rates up around single digits give or take. The word “stable” came up consistently in the commentary we have heard thus far. Rates were generally described as being up somewhere in the mid- single digits so not that different from what is happening in the primary market and certainly nothing that is overly disruptive. Overall, appetites to write casualty reinsurance seemed high at this past renewal period and we expect capital was willing to be deployed to a fair number of accounts and risks... In all, this renewal period was everything that reinsurers had hoped for after so many years of high hopes but no material pricing actions. While last year’s 1/1 renewal period was constructive, this year was a true hard market for many classes and not just property cat risks. High cats, inflation, reserving concerns, and lower capacity drove measured changes in pricing as well as terms & conditions. We will be interested to see the extent to which our covered companies with reinsurance books (AIG, Arch, Fairfax, and W.R. Berkley in particular) pressed on the accelerator and aggressively grew their reinsurance books at 1/1. For now, reinsurance is having its day in the sun.