The global direct and facultative (D&F) market remained resilient at the January 1 reinsurance renewals, Howden reports, with capacity still available at the right price for most cedants, despite the challenging backdrop.
The broker notes that a myriad of events came together to drive the hardest property catastrophe reinsurance market in a generation at the key 1/1 renewals, with structures and coverage terms at the forefront of negotiations.
Yet, even in this highly challenged environment, it reports that the D&F market recorded strong growth in 2022 and continued to support clients renewing programs.
Increased demand for D&F catastrophe cover – driven by an inflation-induced rise in insured valuations on original business, attendant requirements for increased reinsurance limits and reduced retrocession capacity – added to pre-existing supply and pricing pressures.
The below graph from Howden shows how six successive years of significant reinsurance rate rises, with a marked acceleration of 45% in 2023, has yielded a cumulative increase of 160% plus since 2017 to take pricing levels above those recorded in the aftermath of Hurricane Katrina in 2006.
And the underlying market has benefitted from even more substantial pricing tailwinds during this time.
Changes to programmes’ structures and terms were also substantial at Jan 1, with retentions up significantly and coverage terms moving towards named perils, while terms and conditions tightened.
However, Howden notes that late activity in the retrocession market yielded more favourable outcomes than expected for some carriers, which relented D&F supply constraints in late December.
This saw most deals over the line and enabled certain cedents to push back successfully on attempts by markets to limit coverage.
“The D&F market at 1 January 2023 was resilient given the challenging backdrop to renewals,” said Bradley Maltese, CEO of Howden RE.
“Capacity continued to be available at the right price and right level, which meant most placements were completed by year-end. This is testament to the D&F market once again differentiating itself by finding capacity for increased business flow whilst displaying underwriting skill and delivering strong results.”
