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Cedents & reinsurers better prepared for Jan 2024 renewals: Aspen’s Hough

21st November 2023 - Author: Kane Wells

According to Philip Hough, Global Head of Property Reinsurance and Head of EMEA & LATAM, Aspen, there was a calmness to the meetings at Baden-Baden this year ahead of 1:1, after “the chaos and uncertainty around capacity last year.”

“Capacity is available across all lines of business and both cedents and reinsurers are better prepared than this time last year,” Hough explained, speaking with Reinsurance News in a recent interview.

He continued, “At Aspen Re, we believe that 2023’s market environment is more favourable for reinsurers than it has been in previous years. As a result of a general increase in pricing and improvements in terms and conditions, we expect a more orderly renewal at 1:1.”

However, Hough did note that investors remain “particularly cautious” of non-modelled and so-called, secondary peril catastrophe risks.

He observed that renewal discussions at Baden-Baden were somewhat centred around the fact that these secondary perils will reportedly comprise approximately 80% of the US$100bn+ in insured catastrophe losses this year.

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Hough added, “Conversations also extended to property issues beyond catastrophe. Medium-sized risk/fire losses have been prevalent, driving increases in original rates and resulting in cedents undertaking re-underwriting measures.

“The sustainability of reinsurance structures was another area of focus. Surplus treaties are increasingly becoming a pressure point as reinsurers look to manage volatility, improve treaty balance, and mitigate the risk of anti-selection.”

Looking forward, again in terms of catastrophe, Hough noted that Aspen anticipates further price hardening in Europe in 2024, although, “the extent of rate increases will vary by territory.”

“We also expect further corrections to pricing and attachment levels, particularly in loss-impacted areas like Italy, Slovenia and the Nordics, to address increased loss frequency from non-peak perils,” he said.

Hough explained that there are clear signs that cedents will look to purchase additional catastrophe capacity in 2024, however, the significant catastrophe loss experience in Europe during 2023 has “further strengthened reinsurers’ focus on the attachment levels of catastrophe programmes.”

Hough added, “Aggregate capacity continues to be in short supply, and we are seeing a further cutback in the number of these types of structures being purchased.

“When it comes to investment levels across the sector, private equity will remain peripheral because of volatility, recent performance history and climate change concerns.

“In terms of changes, we will see reinsurers raising incremental capital to invest in insurance-linked securities (ILS) markets.”

Discussing Aspen’s strategic outlook and objectives for property reinsurance, Hough underlined that the firm is operating from a “position of strength” having completed most of its portfolio re-shaping efforts over the last few years, including right-sizing its portfolio to align with the group’s balance sheet size and risk appetite.

“In light of this process, our strategy for 2024 will be more opportunity-focused based on a more refined range of key products as we look to materially increase the depth and relevance of the business we write,” he said.

Hough went on, “For Reinsurance, our focus will be on sustainable growth, whilst continuing to optimise our underwriting returns and prudently manage catastrophe risk.

“Overall, building sustainable relationships with reinsurers has undoubtedly taken on greater importance for our cedents. This is a core part of Aspen’s value proposition, and we are well positioned to articulate a clear strategy and risk appetite for 2024.”

He concluded, “We remain committed to building close and broad partnerships with our core clients in a coordinated way across our different lines of business and underwriting platforms.”

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