Reinsurers’ hopes of securing “hard” rates at the recent January renewals were dashed as reinsurance buyers refused to yield, according to a report from S&P Global Ratings.

The sector had headed into the season with confidence, having raised some $US23.6 billion ($30.4 billion) in new funds in anticipation of robust demand from insurers but it appears prevailing market sentiment is primarily US-driven as opposed to broader reinsurance factors.

“Overall, the much-anticipated 2021 January renewals didn't deliver the significant rate increases reinsurers were hoping for,” the ratings agency said. “Rate increases were concentrated in loss-impacted lines of business that most needed it while loss-free lines rose less.

“Global property and casualty reinsurance rate increases were good during the January renewals, but came up short of a hard market, and expectations remain high for the rest of the year.”

S&P says excess capital dampened the ultimate negotiating power of reinsurers. The lower-than-expected pricing increase dashed reinsurers’ hopes of a strong start to the year.

“This comes as the global reinsurance sector faced another heavy catastrophe loss year in 2020, with the added burden of COVID-19-related losses,” the ratings agency said. “Sector participants were hoping this January renewal season would be what turns the tide and lifts all boats to more profitable years.

“However, global reinsurers will have to keep cautiously navigating these choppy waters with a vigilant eye on underwriting discipline, and judiciously push for more rate increases during the upcoming renewals because investments don't provide a safe harbour.”

S&P estimates the top 20 global reinsurers incurred about $US15.5 billion ($20 billion) in pandemic-related losses for all of last year. It expects the sector to swing to an underwriting loss for 2020, citing the combined adverse effects from COVID-19, elevated natural catastrophes, other insurance losses and lower reserve releases.