Double-digit reinsurance price increases were seen for loss-hit catastrophe insurance programs in Australia at recent renewal negotiations with reinsurers, Willis Re says.

Increases on Australian treaties have ranged from 10% to 20%, it says in its latest market update.

More generally, reinsurers focused on wordings, are reluctant to accept any expansions of coverage, and communicable disease exclusions have become mandatory in order to complete placements.

Willis Re says “abundant capacity” is available, although reinsurers have been firmer in their demands on terms and conditions in Australia during the renewals, which were held at the start of this month and last month.

Rate discounts were immediately declined, and flat renewals more difficult to achieve.

“Rate increases, even on non-loss affected catastrophe layers, became more prevalent and a requirement for many reinsurers,” Willis Re says.

Reinsurers are prepared to cut capacity or decline renewals if perceived pricing adequacy was not achievable. This capacity could be replaced, but often with reinsurers waiting for improved terms.

It says a number of reinsurers have actively sought to move away from loss-affected lines in Australia.

“The effect of COVID-19 was a major discussion point in most casualty treaties. However, after thorough review of the underlying risk, reinsurers generally took a pragmatic approach to underwriting the risk,” the update says.

Reinsurers sought to limit their exposure in Australia to future COVID-19 claims in some instances, although for the most part long-term partnerships continued to be important to most reinsurers and buyers alike.

“Exclusionary language” was imposed on some of the treaties and Australian casualty rates continued to be under upwards pressure.

Willis Re says reduced activity and business closures in Australia due to the pandemic have led to reduced gross written premium for insurers across most casualty lines and some insurers expect higher small claims frequency.

Worldwide, insurers comfortably secured their required reinsurance capacity, backed by adequate reinsurance capital, Willis Re says.

A recovery in investment markets and appetite to support additional capital and debt offerings, as well as prudent risk and cost management at reinsurers, saw capital levels bounce back to be only 5% lower than at the close of 2019.

Still, Willis Re says investors in the reinsurance sector remain “cautious and selective”.

Reinsurers are recognising that COVID-19 losses – reported at about $US7 billion ($10.1 billion) so far – may take several years to settle, spreading out reserving over many quarters.

Willis Re Global CEO James Kent, says more persistent hardening is evident largely across the board, but reinsurers continue to exercise clear differentiation between clients, lines of business and territories.

“The value of sustained relationships has once again been proved,” he said.