The reinsurance market is now projecting, through public reporting, that the total ultimate Covid-19 loss estimate will be about $48.2 billion, but allocated to the 2020 reporting year.

A significant amount of this total — $18.9 billion (39 per cent) — remains incurred but not reported, and the majority of 2021 reported development was life business.

A new report quotes Guy Carpenter and AM Best estimates that put total dedicated reinsurance capital at $534 billion, a 2.8 per cent increase from year-end 2020.

Traditional and alternative capital increased 2.7 per cent and 3.7 per cent, respectively.

The weighted average combined ratio for the Guy Carpenter Reinsurance Composite improved by 4.7 points to 98.7 per cent for the first nine months of 2021 compared with full-year 2020’s 103.4 per cent. It is on track to finish below 100 per cent for 2021, despite elevated catastrophe activity.

Reinsurer premium growth was seen across most lines of business due to a combination of escalating rates as well as a charge for increased exposures driven significantly by inflation adjustments. Composite return on equity for the first nine months was 10.1 per cent, improved from 2020’s 3.2 per cent.

This just-released report is January 2022 Reinsurance Renewal — An evolving market leads to divergent outcomes.

Conservative projections show significant insured losses for the year at more than $100 billion, including the fourth-quarter severe storms in the US. The total also includes nearly $30 billion of estimated loss for Hurricane Ida.

Reinsurance broker Guy Carpenter reported that continuing emerging challenges led reinsurers at January 1 renewals to adjust risk appetite and pricing thresholds for certain sectors.

But the majority of placements were ultimately orderly, once cedents’ terms were issued, the Marsh McLennan company said, as market participants effectively traded through a dynamic environment.

The Guy Carpenter Reinsurance Composite index is delivering a combined ratio below 100 per cent for the year and a projected reinsurer return on equity of near 10 per cent, even after more than $100 billion of large global losses.

The Guy Carpenter Global Property Catastrophe Rate-on-Line Index increased 10.8 per cent.

The report said that for property, capacity was sufficient to complete the programmes, with more market appetite for non loss-impacted upper layers.

Capacity was more constrained on lower layers, aggregates, multiyear and per risk, particularly if loss-impacted, as reinsurers reassessed risk appetite and inflationary impacts.

The report said that most significant macro influences at renewal included climate change, core inflation, social inflation, continued underlying positive rate change across most lines of business and the continued evolution of the frequency and severity of catastrophe loss.

Inflation was a central theme in the negotiations and for both pricing and capacity allocation outcomes, individual cedent differentiation was apparent for both non-loss and loss-impacted accounts.

There was a wide range in pricing on a risk-adjusted basis and renewals were a fortnight behind the traditional timing.

It said: “In another year affected by catastrophe events, property retrocession renewals experienced price increases in aggregate and occurrence products, with the largest changes in loss-affected accounts as well as low-lying aggregate placements following reductions in available capacity.

“There was a material variance in pricing depending on loss experience in 2021, and for aggregate contracts in particular, loss history became a much more dominant pricing metric than in prior years.”

It said that the effect was for buyers to see increased retentions and a greater prevalence of occurrence structures where capacity was more readily available at a price.

Capacity was less restricted for direct and facultative catastrophe covers than for retrocession, although it experienced some similar dynamics with reinsurers typically looking to move from frequency areas of programmes.

The report said: “Casualty renewals were generally orderly, with pressure seen in several pockets, including cyber aggregate, clash and loss-impacted excess of loss programmes.”

In casualty there were continued improvements in loss ratios, underwriting discipline and tighter underlying policy terms and conditions, driving up quota-share ceding commission increases ranging from flat to up 1.5 points for excess casualty and flat to up 2.5 points on financial lines.

Loss-impacted renewals were the most challenging and experienced some panel turnover.

In the specialty business, the general aviation and aerospace markets have been relatively unaffected by Covid-19.

Reinsurers have been moving aviation prices higher for the past two years, and this time prices were the same or just slightly higher. Profitable treaties received minor increases in commissions.

In trade credit markets, low loss ratios and claims led to more capacity than demand. Cedents regained price movements at January 1 with proportional treaty ceding commissions increasing, and risk-adjusted improvements realised for excess of loss programmes.

Claims activity in the marine markets led to price movements, but an abundance of capacity led to minimal rate hardening, if at all.