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European reinsurance negotiations are in full swing as we head towards the January 1 renewals. Against the backdrop of a global pandemic, an economic downturn and changing conditions in the insurance and reinsurance market, discussions have been complex. Bertrand Romagné, Chief Executive Europe and CUO P&C International Reinsurance at AXA XL, reflects on trends in European reinsurance in this most strange of years.

European reinsurance renewal meetings traditionally have taken place at meetings during the Rendez-Vous de September in Monte Carlo and at the Baden-Baden Reinsurance Meeting. It’s a sector where face-to-face meetings and long-term partnerships have always been valued. 

This year, however, has been different. As so often in these unprecedented times, everyone involved in these discussions – buyers, brokers, reinsurers, advisors – had to find new ways of working. And talks began earlier than ever this season, with all participants acutely aware that negotiations around rate, coverage and terms and conditions might be more complex given the backdrop of the global pandemic and its economic impacts, as well as the availability of capital in the market. 

We have just completed a virtual Baden-Baden reinsurance congress, with meetings taking place over video calls. Discussions were lively; naturally, the reinsurance rating environment was a hot topic. This year, the global reinsurance market has seen a number of catastrophe losses, the continued effect of social inflation on casualty lines and, of course, the effects of COVID-19. While the loss picture and impact of the pandemic is not yet fully known, these factors have added to an already noticeable trend of rate increases across most lines of business. 

The market is coming off the back of ten years of decreasing rates and all participants in the reinsurance market have become keenly aware of the need to maintain profitability. The series of recent losses, coupled with the continued low interest rate environment, was driving a steady rate correction across the market even before the extent of the COVID-19 crisis became clear. 

Discussions in September and October were not just about rate, however. Indeed, terms and conditions of coverage were perhaps the bigger talking point. The COVID-19 pandemic has underlined for many reinsurance underwriters and buyers the continued need to drive for clarity in coverages. 

We engaged in negotiations with buyers and brokers about coverages such as non-damage business interruption, cyber and strike, riot and civil commotion, among other topics. The impact of social inflation on casualty lines, while currently less marked in Europe than in markets like the US or Australia, also has been a hot topic in this year’s renewal talks. And, of course, the risk of natural catastrophe is an evergreen discussion point in reinsurance renewals. 

Many buyers are seeking to purchase more reinsurance coverage this year. But while global reinsurers continue to provide solid capacity to the market, there has not been a rush of additional capacity available. This is perhaps one reason why buyers have been keen to begin discussions early, to secure capacity where they need it the most. 

Exceptional times 
As we head towards the end of the year, the COVID-19 pandemic and its effects on societies and businesses will continue to dominate all discussions, not just those about reinsurance renewals. At the macro-economic and political level, reinsurers in France have been involved in talks with government about ways to cover currently uninsurable risk. 

I have just completed a second year as president of the French reinsurance association APREF (Association des Professionnels de la Réassurance en France). One of the most interesting and important projects that we have been working on this year has been a joint initiative with the French insurance association, the FFA (Fédération Française de l’Assurance) and the French Ministry of the Economy to try to find a way to respond to systemic risks like pandemic, terrorism or natural catastrophe.

Talks are continuing about the potential creation of an exceptional disaster – or ‘CATEX’ – public-private partnership fund, that would provide covered insureds with a lump sum payment to help them weather an immediate crisis should their business be forced to cease because of an event like COVID-19. Payments would be triggered if there were a declaration by the French state mandating businesses to close.

Discussions are ongoing with all participants focused on finding innovative solutions for these complex and evolving risks.

As we head towards the end of this most extraordinary of years, thoughts turn towards 2021. With the effects of COVID-19 pandemic still unfolding, it looks like we are set for another year of uncertainty and change. 

The reinsurance market is used to cycles, but this phase is a new experience for all of us. However, reinsurers with a global footprint and sound financial strength, like AXA XL Reinsurance, remain ready to work with buyers to help them transfer risks in these unprecedented times.

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