While rates in China were up more than 20% for many contracts, the January renewals could have been a lot more painful for cedents if competition among reinsurers was not so high.
Wang Wei, Chief Executive of Rare Earth Insurance Partners, explained, “Reinsurers don’t worry quite as much in other Asian countries about whether or not a ceding company can accept the new terms. But here, in China, the cedent was still able to extract some concessions from the lead reinsurer,” said Wei.
This is not to say that renewals in China have been easy this year.
“The leading reinsurers [in China] had to be prepared to provide some compromise to the ceding companies if they wanted to keep their position in the country. It’s very difficult for them to say: if you can’t agree with our terms, then we’ll just go.”
He added that a number of the larger insurers were able to successfully push back on aggressive demands from reinsurers, with smaller players being squeezed more.
“The lead reinsurer should be the closest partner to the ceding company, helping to support the strategy of the business in the long-term. It’s better to have a reputable leader over a long period of time. If the ceding company changes the leader frequently, then the market will think negatively of that company and the treaty. But this year we saw lead reinsurers being replaced quite a lot,” said Wei.
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