Executives from the Bermuda reinsurance market are expressing optimism about the 2024 property reinsurance operating environment, foreseeing stability in terms and conditions.
While there is some divergence in views on January 1 property catastrophe rates, the consensus points towards a steady market.
In the U.S. property catastrophe segment, there is a nuanced picture emerging. While there’s a slight disagreement on catastrophe reinsurance pricing for January 1, 2024, early contracts have seen a marginal increase.
The sentiments vary across layers, with higher layers experiencing a decline in rates due to robust capital inflows and positive catastrophe bond activity. However, coverage for lower layers is either prohibitively expensive or largely unavailable.
Despite uncertainties, executives concur that terms and conditions, particularly the 1/1/23 attachment point increases and exclusions for specific events like terror and riots, remain stable.
The anticipated demand surge, attributed to labor inflation and housing starts, competes with a growing supply driven by strong recent earnings.
European catastrophe reinsurance rates are on the rise, with high single-digit increases overall and even higher for loss-impacted accounts. The influence of major European reinsurers tempers this growth, along with adjustments in the new RMS model. The U.S. continues to offer the highest expected catastrophe reinsurance returns.
Notably, 2023’s combination of elevated attachment points and severe weather events, including over twenty $1 billion incidents, has adversely affected smaller Midwestern mutual insurers. These insurers reportedly struggle to adjust rates sufficiently to accommodate higher reinsurance costs.
Casualty reinsurance is witnessing tightening conditions, primarily manifested through declining ceding commissions. Executives anticipate a drop in ceding commissions to 27.5-30.0% from the previous range of 30-35%, coupled with ongoing increases in primary casualty rates.
The industry remains attentive to social inflation, driving persistent reserve charges on pre-hard market accident years.
There is a notable demand for reserve covers, reflecting concerns about potential liabilities. Additionally, some executives foresee a stabilisation in the declining trend of public company D&O pricing during 2024.
