As per analysts from KBW, most of the re/insurance executives that the firm met in this week’s Bermuda Tour expect the Florida-heavy June 1 property catastrophe reinsurance renewals to reflect overall y/y risk-adjusted rate changes in the “flat to down 5%” range.
KBW’s analysts noted that several executives reported modest improvement over the last two or three days, with gaps in a few programs, which could produce modest y/y increases.
“Individual carrier descriptions will inevitably vary somewhat, but we expect post-6/1 summaries to describe low- to mid-single digit risk-adjusted rate decreases with modestly expanding terms and conditions and virtually unchanged attachment points, still implying very attractive expected returns,” the firm said.
Meanwhile, according to the analysts, within reinsurance towers, risk-adjusted rates for lower layers of coverage are “broadly holding firm or rising slightly”, with modest decreases manifesting themselves within higher layers.
KBW’s analysts continued, “Virtually all executives noted the absence of material traditional reinsurer or ILS capital inflows beyond retained earnings and a few capital raises, which are themselves largely being absorbed by increasing demand comprising better-funded cedents, some Citizens’ depopulation activity, and orderly renewals.”
Commenting briefly on attachment points, KBW said it was “very slightly disappointed, but really not surprised” to learn that reinsurers plan to raise attachment points every few years rather than adopting smaller and smoother increases that should better proxy loss trends.
The analysts concluded on this matter, “We concede that the logistics are easier (it’s admittedly simpler to conceive of a $90 million excess of $10 million than of $94.5 million excess of $10.5 million), but smaller, steadier attachment point increases would probably moderate the pricing cycle and minimize uncertainty for all parties.”
