Analysts at RBC Capital Markets expect the hard reinsurance market environment to persist into 2024 as the industry’s resolve to deliver adequate returns remains.
According to RBC, there will be further rebalancing of the insurance value chain between primary insurers and reinsurers as both acknowledge the inequity of how losses were shared in the past.
As evidenced through the changes seen throughout the 2023 renewals, reinsurers are eager to focus on being the shock absorber for large events, and move away from earnings events which they feel should be absorbed by the primary market.
“The 2023 renewals were seen as a step change, and consequently disruptive to proceedings. Heading into 2024, reinsurers’ expectations appear to be better signposted this time,” say analysts.
RBC’s outlook is that the rate increases in 2024 will fall somewhere between flat to +5% on a risk-adjusted basis, accompanied by further fine-tuning of terms and conditions, in favour of reinsurers.
Additionally, analysts feel that renewal volumes might have been “partly curtailed” by tighter reinsurance budgets of primary players, and the preference for excess of loss contracts over quota shares, as reinsurance firms have more pricing autonomy there.
“Looking ahead, we see scope for demand to increase helped by a re-acceleration of primary rates and possibly heightened risk aversion. Nat cat risk is one such area where the supply/demand imbalance is being keenly felt this year,” continued analysts.
