Analysts at Morgan Stanley have said that widespread plans to pull back from the property catastrophe market should “bode well” for reinsurance pricing into 2023.
Morgan Stanley says it has observed “many reinsurers” pulling back from the property cat market even as reinsurance capacity growth has returned to healthy levels following the severe weather losses of 2017-2018.
However, it notes that capacity has shifted to more casualty oriented lines of business, and even alternative capital is not filling the gaps in underwriting capacity during property renewals.
Florida Citizens, for instance, has only been able to fill around 36% of its $3.6 billion reinsurance tower target, citing difficulty from tight capacity in the Florida property market.
Likewise, AXIS recently announced the planned exit of its ~$700 million premium Property Reinsurance business in a continued effort to reduce its volatility in the business.
And while RenRe continues to be a large player in the property reinsurance market, the company has also become increasingly focused on growth in its casualty book.
Looking at the largest European reinsurers, Morgan Stanley reports that SCOR is reducing its nat cat exposure by 15% by the end of year 2022 which was increased from earlier announced 11% reduction at January renewals.
Reason cited by the management was insufficient net expected margins relative to the expected volatility, and the company expects to take additional actions at July/July renewals if market conditions don’t improve sufficiently.
Unlike others, Swiss Re has grown its nat cat premiums by 23% as of Q1 to $2.8 billion citing strong pricing momentum in the business. As a consequence it has increased its nat cat loss budget to $1.9bn for P&C Reinsurance division for 2022 which is a significant increase from 2021.
Hannover Re increased its nat cat large loss budged from €1.1 billion to €1.4 billion for 2022, partly driven by lower retro cover and partly by strong January renewals with volumes up 5.9% at January.
And finally, Morgan Stanley contends that Munich Re isn’t trying to increase or reduce its exposure to nat cat.
