Speaking with analysts at KBW, Gallagher President, Thomas J. Gallagher, has anticipated low-teens reinsurance organic growth in Q2 of 2024, including sustained reinsurer discipline with property pricing slightly down but with rising aggregate demand heading into a potentially active hurricane season.
In discussions between analysts at KBW and Gallagher executives at the latter’s Q2 2024 investor day, the firm’s President noted that there is more capacity available for higher reinsurance layers and more stable capacity for lower layers.
Thomas J. Gallagher continued, “U.S. casualty renewals remain challenging with heavy pricing scrutiny, reflecting widespread reserve strengthening and still-elevated loss trends; carriers with better prior year reserve development are securing better terms and conditions.
“International property reinsurance treaty renewals were mixed, with Latin American flat to up modestly y/y, Middle East accounts up by double digits, and UK renewals flat.”
Elsewhere, commenting on U.S. Retail, the head of this segment at Gallagher, Mike Pesch, told KBW of a 5% renewal pricing increase (6-7% excluding property), below Q1 2024’s ~7%, with umbrella, general liability, and commercial auto up 9% and workers compensation up 1%.
Gallagher reportedly expects casualty rate increases to keep accelerating, reflecting worsening social inflation, rising medical expenses, and litigation financing, with moderating property rate increases as (re)insurers approach rate adequacy.
According to KBW, Pesch also reported steady or slightly improving retention rates and robust new business generation.
“He noted a small headwind from lower late-April midterm policy adjustments, but more positively, May and early June audit premiums, policy adjustments, and cancellations have been more in line with 2023,” KBW’s analysts said.
On the International Retail side, Gallagher said that Canada’s 4% renewal premium increases include a single-digit property rate increase and mid-single-digit casualty rate increases in casualty lines, lower than those in the U.S., which KBW thinks reflects the U.S.’ unique litigation environment currently driving elevated social inflation.
Meanwhile, Gallagher reported renewal premium increases of 9% in the UK, 5% in Australia, and 14% in New Zealand, with low-double-digit increases in most lines while professional lines (including D&O) were up mid-single digits.
In conversations on Risk Placement Services (i.e., Wholesale), KBW noted that U.S. Wholesale Brokerage President Joel Cavaness anticipated a “sequential slowdown” in organic growth to 7-9% for Q2 of 2024 (Q1 2024: 13%) with about 8% growth in open brokerage and slightly faster binding authority growth.
“He noted decelerating renewal premium increases of 5% in Q2 2024’s first two months (1Q24: +8%), reflecting moderating property pricing increases (up low single digits), and still-strong umbrella (+12%) and commercial auto (+20%) increases; rates for most other lines except public company D&O are up mid-single digits,” KBW’s analysts said.
As for the Brokerage performance outlook, Gallagher expects 7-9% full year 2o24 organic revenue growth (Q2 2024: 7.5-8%) and full year 2024 margin expansion of 60 bps (including 90-100 bps of expansion in each of Q2, Q3, and Q4).
