According to Gallagher Re’s 1st View renewal report, the global reinsurance market returned to a “more stable and predictable” renewal at 1/1, driven by a healthier property reinsurance market.
This is in sharp contrast to 12 months ago when the market reportedly endured a “stressful and late” renewal due to a volatile property reinsurance market.
Gallagher Re CEO, Tom Wakefield, added, “Property supply and demand has snapped back into balance, with returns for the first three quarters of 2023 exceeding reinsurers’ increased cost of capital, underpinned by the exceptional structural changes achieved last year.
“Retained earnings, modest new capital raises, ample retrocession capacity and buoyant ILS markets combined to increase available catastrophe reinsurance limit, resulting in a much calmer renewal period.”
Wakefield continued, “Signs of over-placement on well-structured programs also indicate an improving position for some buyers going into 2024.”
Gallagher Re’s 1st View renewal report also noted that a lack of large US wind events had a positive impact on insurers’ and reinsurers’ results alike in 2023, however, there were still more than $100 billion of insured property catastrophe losses in the year.
“In the US, severe convective storm losses exceeded $59 billion. This resulted in US insurers assuming most of the losses net, given increased retentions and the scarcity of aggregate protection,” Gallagher Re explained.
The firm went on, “Pricing and coverage divergence exists in personal and commercial lines, with those operating in tightly regulated markets having limited ability to pass on the increased cost of risk. Some buyers sought capacity from alternative sources of capital, such as catastrophe bonds.”
Now, with capacity pressure easing, Gallagher Re observed that many primary companies have successfully managed to buy more tail cover.
“This increased demand for top-end protection, particularly in the US, has been supported by the reinsurance market’s appetite to deploy capacity, particularly where non-modelled peril activity is deemed remote,” Gallagher Re stated.
The firm concluded, “Renewal pricing at this level has consequently been squeezed and signings suggest that there will be further capacity available for those nationwide/global carriers renewing through the rest of the year.
“For frequency protections on either an aggregate or low-level occurrence basis, reinsurance capacity has been very tight, leading a growing number of buyers to utilize structured buy-downs to meet their needs.”
