2023 is predicted to be a below average storm season in the US, which along with price increases achieved over the past several years, should benefit re/insurers and underwriters; this amid a “fatigued” market caused by a challenging last 5 years from a catastrophe loss perspective, Amwins CEO Scott Purviance commented in a recent interview with Reinsurance News.
“Clearly I’d say, 2022 was a challenging year, and Ian was the straw that broke the camel’s back. I think that when that occurred, through what had been a four-year hard market with most lines of business moving higher during that period.
“But property in particular was one line that has been consistently increasing in prices over that four-year period. What we saw post Ian was that carriers were almost frozen, not knowing what the impact was going to be on their reinsurance renewals, and what they were going to be able to write in 2023.
“There was also a lot of trepidation and anticipation for the January 1 reinsurance renewals. By November of 2022, we saw a property pricing jump from the low teens back above 20%, and it has accelerated from there in our marketplace.”
Following these events, this Spring so far has been the most challenging property environment Amwins has experienced in a very long time if not ever, Purviance highlighted.
He compares this environment to the six months post-Katrina, which had a very intense hard market, but very short lived. This is now in the fifth year of a hard market and suddenly it re-accelerated for property cat this spring, he pointed out.
“D&O and cyber are at the other end of the spectrum in 2023. Both of these lines of business saw substantial increases 2021 and through midyear 2022. Since then, we have seen the increases decline dramatically and even flip to price decreases,” Purviance explained.
“On those two lines of business, we are now in a period of time where it’s definitely no longer hard market conditions and we’re seeing price decreases or flat renewals.
He continued: “With respect to casualty lines of business, we experienced an increasing rate environment for the four-year period, but it never got quite as challenging as property. We saw price increase steadily decline into the mid single digit range by the end of 2022. .
“By mid way through Q1 2023, we started to see casualty pricing strat trending back up again.It’s hard to pinpoint exactly what triggered it, but there’s been a lot more talk about lost cost inflation. It may have been a result of going through the year end reserve reviews, and not having as much redundancy in loss reserves as carriers might have expected.”
Against this background and looking ahead, Purviance believes that, when it comes to property cat, it cannot get much worse. He said: “With the magnitude of some of the pricing increases, we’ve even seen buyers get to the point of not being able to afford buying the same limits that they had last year.
“That’s not every buyer, but some pockets are hitting the point where they’re buying less limit or are having to take much bigger coinsurance participation and significantly higher deductibles. So, I think we’ll see this pricing continue through July, then it is going to depend on the storm season.”
Purviance highlighted that if there is a below average storm/hurricane season this year – as the University of Colorado has forecasted -, or there is not a major $25 billion plusevent, then the industry will see some mitigation in the price increases of property cat this fall.
“In 2024, if I had to guess, I would say we would expect to see rates something in the mid single digits. That, combined with how much prices have increased over the past five years should start resulting in underwriters and reinsurers generating meaningful underwriting profits and hitting their return on equity targets.
He concluded: “Overall the industry is starting to generate some pretty good underwriting results based on Q1 2023 it’s not all across the board and the top quartile of insurers and reinsurers are continuing to do better than the entire market, but we’ll get to a point where pricing appears to be pretty adequate across most lines of business.”
