While the reinsurance market certainly stabilized in the course of the January 2024 reinsurance renewals (from the chaotic January renewals of final yr), consumers with loss-affected applications skilled additional upward stress on retentions and costs, in response to reinsurance brokers in feedback in regards to the renewal season.
“Overall, there was an adequate supply of catastrophe and risk capacity and in some cases capacity outpaced demand. But there was greater reinsurer price sensitivity on loss-impacted programs.” That was Gallagher Re’s summation of the US property renewal market at 1/1, which noticed catastrophe-loss-hit applications starting from worth hikes starting from 10% to 50%.
“Lower attaching catastrophe layers [in the US] experienced the greatest [upward] pressure on rate, while mid-to-upper layers benefited from ample capacity,” stated Gallagher Re’s 1st View report, titled “What a Difference a Year Makes.” (See associated chart under).
A Return to Balance: Brokers Say Reinsurance Renewals Were ‘Stable’
U.S. renewals at Jan. 1, 2024 “reflected improved supply dynamics, with reinsures willing to support terms and pricing levels broadly aligned to those established during last year’s renewals,” stated Howden in its report, titled “A new world.” “Whilst capacity continued to be restricted for lower layers, increased competition further up programs (driven in part by the ILS market) brought more attractive pricing for mid-to-top layer risks.”
Loss-hit disaster applications noticed vital fee hikes elsewhere on this planet. For instance, Turkey skilled a doubling in charges after the lethal 7.8 magnitude earthquake in February 2023, whereas Italy noticed will increase starting from 25% to 50%, in response to Gallagher Re’s report.
Global property disaster reinsurance risk-adjusted fee adjustments averaged from near-flat to single-digit will increase for non-loss-affected applications with 10%-30% will increase for loss-affected applications, “with a wide range of outcomes around these averages,” stated Marsh, in its renewal commentary, titled “January 1, 2024, Reinsurance Renewals Reflect a Motivated Market With Increasing Capital.”
Loss-Free-Program Surprises
Jefferies, the fairness analysis agency, quoted Gallagher’s report, which revealed that the majority loss-free contracts have been priced upwards by 0% to 10%.
However, Jefferies additional commented on the “surprising strength of rate rises in Europe,” pointing to “loss-free Turkish contracts pricing up by between +50% and +100% (due to the earthquake),” stated Jefferies, quoting Gallagher Re statistics.
“One particularly positive surprise to us was that German, Swiss, Austrian, and Eastern European loss-free contracts priced up between +7% and +15%. European contracts generally appear to have priced up more than most, with loss-free contracts up by between +5% and +10% in most cases, which compares favourably to the US and most of Asia at between 0% and +10%. In Asia, China stands out at +5% to +20%, which perhaps reflects the underlying profitability issues,” Jefferies continued.
Elevated Catastrophe Losses
Elevated disaster losses imply elevated exposures and elevated demand for 2024, the brokers confirmed.
“[I]nsured losses from natural catastrophe events were again at elevated levels relative to historic averages, driven mainly by an unprecedented impact from severe convective storm activity in the US and Italy, windstorm Ciaran in France, flood losses in New Zealand, flood and wildfire losses in Greece, a major earthquake in Turkey and Hurricane Otis in Mexico,” stated Aon in its market report titled “Reinsurance Market Dynamics – January 2024.”
The general property disaster price ticket for re/insurers hit $100 billion throughout 2023, with extreme convective storm (SCS) losses accounting for almost $60 billion of that complete, stated Gallagher Re. “Reinsurers adjusted their view of SCS frequency to account for the 2023 storm season, which put additional pressure on pricing.”
The publicity tendencies, ongoing inflation and the January 2024 renewals set “the stage for an interesting year ahead,” as demand for property disaster reinsurance stays robust, Aon stated.
“As capacity continues to build, there will be opportunities for insurers to buy additional limit at the top of programs, and for reinsurers to work with brokers and clients to share the burden of secondary perils [such as SCS] more equitably,” Aon continued.
“The increases in retentions a year ago have mitigated reinsurer losses and contributed to their positive returns in 2023. But this has come at the expense of increased retained losses for insurers many of whom are struggling to achieve the improvements in primary pricing and underwriting which are often slowed by regulatory approval process quickly enough given their limited sources of capital to sustain increased catastrophes,” Aon stated.
Topics
USA
Pricing Trends
Property
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