We need to talk about the cost of reinsurance.
Executive Summary
While insurance is still relationship-based, the reality is reinsurers are data-driven entities, and in a world of failed promises, relationships alone are unlikely to earn an insurer the credit—or commissions—they believe they deserve, writes Will Ross, CEO of Federato. Ross believes there is a massive opportunity for those carriers and MGAs who can "show not tell" how they will perform against the plans they put forward to reinsurers.Primary property/casualty insurance carriers and MGAs are still squeamish following the most difficult January reinsurance renewals the industry has seen in nearly two decades. Gallagher Re called this the toughest January 1 renewal “in a generation.” As P/C insurers all compete for the same limited capacity, they face shrinking margins as the cost of reinsurance steadily rises. These costs are inevitably passed on to the insured.
While there are signs that the market may be improving, this problem isn’t going away any time soon. In a recent report, investment banking and reinsurance broking firm Stonybrook Capital said it expects reinsurers to “remain in the driver seat” with a “hard market continuing well into 2023.” The report also notes growing coverage restrictions, with reinsurers “often restricting cover to ‘named perils.'”
