Best's Review



From the Editor's Desk
Momentum Change

Loss creep sneaks up on reinsurers, resulting in adverse loss development and a shift in pricing trends. Also, AMBestTV will cover the annual Vermont Captive Insurance Association conference, held each August in Burlington.
  • Patricia Vowinkel
  • August 2019
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Reinsurers, fresh off of an upturn in pricing at the June and July renewals, are preparing for the January 2020 renewal season and heading to the Rendez-Vous conference in Monte Carlo next month.

The summer renewals were characterized as having “tangible pricing momentum,” by Willis Re in its 1st View renewals report. Most territories and classes saw price increases and some tightening in terms and conditions, the reinsurance intermediary reported.

In a June report on the Florida market, AM Best said the soft pricing to which many had become accustomed is shifting to a firmer market.

Reinsurers point to unexpected adverse loss development from both Hurricane Irma in Florida in 2017 and Typhoon Jebi in Japan last year as drivers of the momentum shift.

Be prepared to hear about loss creep, a term for losses that extend well beyond what the industry and modelers had expected for a catastrophe.

This shift in pricing dynamics raises questions about the upcoming renewals in January and whether increases will be sustained.

Increased reinsurance pricing could affect Florida insurers. Florida property writers spend a considerable amount on reinsurance, according to the AM Best report. Of the 25 Florida direct insurers listed in the report, unaffiliated ceded written premium constitutes at least 50% of policyholder surplus for all but one, and 21 have a ratio over 100. Unaffiliated ceded premium reflects dependence on private market reinsurance.

Other questions: Will losses continue to mount? What impact could that have on the retrocession market?

August is Reinsurance Awareness Month. Our August reinsurance special section looks at the developments in the Florida market, the impact of Typhoon Jebi and loss creep, and the dynamics of the ILS market and the problem of trapped capital.

In his At Large column, Stephen Catlin, founder of Convex Group and Catlin Group, considers the reinsurance market ahead of the Rendez-Vous gathering. In April, Catlin launched a new specialty insurer and reinsurer with capital from private equity of $1.8 billion.

In “Market Correction,” Best's Review looks at the Florida market and the impact of Hurricane Irma. “That market had been relatively cat-free for a long time, so companies got more and more complacent, and it allowed the market to slide lower,” said Scott Mangan, associate director of P/C reinsurance at AM Best.

A year after Hurricane Irma hit Florida, Typhoon Jebi struck Japan. The two have been poster children for loss creep. In “Winds of Change,” Best's Review looks at the reinsurance impact of Typhoon Jebi and why the original loss estimates were too low.

Investors in insurance-linked securities also suffered losses from Irma, Jebi, as well as hurricanes Harvey, Maria, Michael and the California wildfires. “A Pause After the Storms” examines the issue of “trapped” investor capital, funds held against slow-developing 2017-2018 losses. That has contributed to a capacity crunch for the property cat retrocession segment.

To read these and other features online, go to


Patricia Vowinkel, Executive Editor,

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