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January 13, 2021

Industry Challenge

January 1st Reinsurance Renewals Reveal a Healthy and Evolving Market

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What: January 1st is traditionally a big day for renewals in the reinsurance sector. This year, those renewals are showing a healthy and evolving market, with product differentiation becoming more sophisticated, which means reinsurers are adjusting their risk appetite and pricing thresholds more dynamically.

“Innovation and adaptation to the changing risk landscape remain the hallmark of the (re)insurance sector. As new technology emerges, InsurTechs will remain an extremely active market in 2022.” – Guy Carpenter & Company, LLC

Why it matters: As reinsurance pricing sophistication matures, more product innovation is enabled. Reinsurance has always been on the cutting edge of contractual creativity, but the combination of additional digital pricing data and maturing pricing will soon usher in a new era of digital innovation.

Read: An Evolving Market Leads to Divergent Outcomes

Industry Challenge

Are Reinsurers and MGAs Taking Over Insurance?

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What: InsurTech Co-Founder Marty Young of Buckle claims that reinsurers are becoming dominant players in the insurance industry. The industry is moving to a point where the capability of becoming a reinsurer is quickly becoming a company’s best option. 

Quote: “As the value chain breaks apart, the real economics move out into capital markets, the reinsurer markets and then people of proprietary distribution,” Mr. Young said, referring to MGAs. “That’s just going to squeeze everything [insurance underwriters and carrier executives] in the middle out.”

Why it matters: Traditional carriers have been handcuffed by legacy technology, which has also been holding back agencies and creating friction for policyholders. Reinsurers, as younger corporate entities, are not constrained by this technology and come to insurance with a fresh mindset – whether by partnering with digitally enabled MGAs or standing up products from scratch. This break from tradition is a game-changer in the industry and positions reinsurers to become industry leaders.

Read: Do Reinsurers Rule the Industry?

Industry Challenge

Covid is the 3rd Largest Catastrophe Loss in Recent History

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What: So far, the $44 billion price tag on COVID-19-related insurance claims represents the 3rd largest recent historical event cost behind Hurricane Katrina and 9/11, though it has fallen far below the initial estimate of $100 billion-plus. And with exclusions now in place for COVID-19, we’re not likely to see the cost materially grow from here. 

Why it matters: Pandemics have been a consideration for risk modeling in the past, but the results typically took a back seat to catastrophe losses. COVID-19 has changed that and introduced the “pandemic peril” as an important consideration in pricing. Covid’s financial impact is accelerating the industry’s move to by-peril rating and the unbundling of risk. This unbundling will lead to growth opportunities for carriers and reinsurers. Given the magnitude of the risk, it is also likely to bring in securitized or parametric insurance from capital markets.

Read: COVID-19 Claims of $44B Are 3rd Largest Catastrophe Loss: Howden

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