As per Gallagher Re’s latest mid-year renewals report, market softening in Florida levelled off and firmed as capacity became less abundant closer to June 1, ultimately leaving risk-adjusted rates on most programs either flat or down by as much as 10%.
The report found that programs which were completed in early May saw an environment where capacity was readily available, with many reinsurers looking to deploy increased capacity on programs.
The broker noted that this dynamic shifted closer to June 1, as ILS capacity became scarce due to ILS investors being “unnerved” by forecasts of an active hurricane season.
In addition, Gallagher Re highlighted how the expected Florida market cat bond capacity fell short in May, and pushed additional capacity need to the traditional market.
Moreover, the report also found that quota share capacity with catastrophe coverage in Florida has rebounded due to primary rate increases and credit for improved attritional loss ratios driven by legislative reform.
Moving attention now towards U.S. property, the broker explained that there was an acknowledgement among reinsurance markets that after two years of material increases, property rates are now adequate to sustain long term profitability.
The firm noted that catastrophe capacity has increased materially, primarily due to a combination of profitable underwriting results and meaningful retained earnings.
However, Gallagher Re added, that property per risk capacity remains in shorter supply, with the sector still grappling over valuations, inflation, and the impact of secondary perils on per risk exposures.
As well as this, quotes received across U.S. property demonstrated reinsurers attempt to hold onto gains that were achieved the past couple of renewal cycles, with most quotes offered being up flat or up mid-single digits on a risk adjusted basis.
Gallagher Re also noted that a number of large carriers opted to increase their total Cat XOL purchases, with an estimated $5 billion of new capacity purchased.
Gallagher Re’s report also explained that buyers of property catastrophe reinsurance have been able to negotiate better terms and conditions on their contracts in 2024 due to the “risk on” approach taken by reinsurers, read more here.
