Following a difficult January reinsurance renewal season in 2023, it felt “like a much more normal renewal” this year with fewer surprises, but to ensure a sustainable balance in risk sharing, continued underwriting discipline is paramount, according to Gianfranco Lot, Chief Underwriting Officer (CUO), P&C Reinsurance, Swiss Re.
“From a reinsurance perspective, there were fewer surprises compared to last year, but it wasn’t without its challenges,” said Lot in a recent blog post exploring the dynamics of the 1.1 2024 renewals.
According to Lot, the renewal was more orderly than last year in the sense of a heightened focus on price discovery, in part as a result of retrocession capacity being in place earlier, while competition rose and requests to quote business from brokers increased.
“I would add that while the re/insurers have fared better in the first nine months of 2023 than the past five to six years, the risk environment has not changed, in fact a new norm has been established,” said Lot.
The Swiss Re executive highlights the ongoing inflationary landscape, rising geopolitical tensions, and another year when insured losses from natural catastrophe events exceeded $100 billion.
“It is therefore imperative that as an industry we maintain the underwriting rigor that we saw in the past few years in the primary market and during last year’s reinsurance renewals,” he said.
Discussing some of the nuances in different lines of business, Lot notes that overall, the reinsurer continues to see improvements in terms and conditions and an emphasis across the sector to better understand, navigate, and manage risk.
“On the property side, there was widespread recognition that primary insurers are best suited to absorb frequency losses, while reinsurers are best placed to act as a shock absorber,” said Lot.
Unlike last year, supply and demand dynamics within the property space “found an equilibrium”, with some oversubscription on the higher end of nat cat programmes, while some lower attaching layers were not fully placed.
In the casualty space, Lot highlights additional pressure on loss trends and more uncertainty in US liability in particular.
“We have observed moderated improvement on terms and conditions but, in our view, not sufficient to compensate for loss deterioration and a challenging outlook,” he said.
Turning to the specialty arena, and Lot has been surprised by cyber.
“The growth projections of our clients for 2023 did not materialise and clients opted to retain more, ceding less to the reinsurance market. This impacted particularly the proportional cessions,” he explained.
Looking ahead to the April and mid-year reinsurance renewals, Lot expects another round of relatively normal renewals, absent any major losses or legal developments.
However, the year started with a powerful earthquake in northern Japan, and combined with the fire and destruction of a JAL airliner following a collision with a coastguard plane in Tokyo, the grounding of Boeing’s 737 Max 9 planes, and political uncertainty across the globe, it’s too early to tell exactly how the upcoming renewals will play out.
“Finally, it’s important to recognise that the hard work during 2023 paved the way to a more predictable renewal this year. It’s important the underwriting discipline is maintained to achieve a sustainable balance in risk sharing moving forward,” concluded Lot.
