KBW Europe’s recent discussion on the January 1 reinsurance renewals, led by William Hawkins and Darius Satkauskas, reveals promising insights into the industry’s outlook for 2024.
Hosted with industry experts David Flandro of Howden Re and James Vickers of Gallagher Re International, the dialogue centered on the findings from their respective companies’ reports.
Howden Re estimated a global property catastrophe reinsurance rate increase of approximately 3% year-over-year, slightly below Gallagher Re’s estimate, which is attributed to mix variations.
Noteworthy is the significant increase within lower loss layers and for clients and regions impacted by losses. Meanwhile, casualty reinsurance ceding commissions experienced a modest decrease, contrary to initial expectations.
Persistent primary rate increases, coupled with steady-to-modestly higher reinsurance pricing, suggest a positive outlook for reinsurance combined ratios, says KBW.
KBW maintains Outperform ratings on ACGL, EG, and RNR, identifying them as major beneficiaries in the current favourable reinsurance market.
David Flandro reported balanced 1.1 renewals, with risk-adjusted property-catastrophe reinsurance pricing rising around 3% year-over-year, a considerable drop from the previous year’s 37% surge.
Concerns over social inflation impacted casualty quota share reinsurance ceding commissions, influencing casualty excess-of-loss reinsurance rates.
James Vickers confirmed orderly 1.1 renewals, highlighting consistent pricing and structures. The January 1, 2024 reinsurance renewal report from Gallagher Re provided additional insights into pricing changes across various categories.
In terms of capital and capacity, Flandro noted year-over-year capital growth primarily attributed to recovering asset values, with actual capital inflows of about $17 billion, largely from catastrophe bonds.
Vickers mentioned increased demand for tail cover as pricing for higher loss layers subsided, though capacity for aggregate or low-level occurrence covers remained costly.
Gallagher Re’s report noted that specialty insurance capacity “remained buoyant,” with concerns centered around war, political violence, and terrorism. Aviation All Risk XoL pricing showed signs of stabilisation, while primary rate reductions posed challenges for pro-rata reinsurers.
In the cyber insurance sector, reinsurance demand shifted towards excess-of-loss cover, indicating market maturation and increased confidence in expected results.
KBW expects the overall operating environment for Bermudian re/insurers to remain robust in 2024. Favourable catastrophe conditions, stable terms, and positive risk-adjusted reinsurance rate changes, combined with primary rate increases and declining acquisition costs in casualty lines, contribute to this optimistic outlook from the firm.
