Broader market trends seen at January 1 continued at mid-year renewals, but with improved timing and concurrence around terms and conditions, according to Guy Carpenter, a leading global risk and reinsurance specialist and a business of Marsh McLennan.
Guy Carpenter suggested that while property pricing saw continued risk-adjusted rate increases in many segments, the average change moderated from January 1.
“Additional capacity and increased appetite entered the property market at mid-year. However, the increased capacity remained highly disciplined around attachment points, pricing and coverage,” the firm explained.
As for other key developments in the property space at the mid-year renewals, Guy Carpenter said a strong demand for limit persisted, but market corrections have rebalanced the supply/demand disparity faced by many regions a year ago.
“Across the board, pricing is firm with a wide range of risk-adjusted rate changes seen throughout individual layers,” the firm wrote.
Guy Carpenter continued, “Global property catastrophe reinsurance risk-adjusted rate increases ranged from +10% to +50%, with loss-impacted clients often seeing higher pricing.
“In the US, property catastrophe reinsurance risk-adjusted rate increases were on average the highest in 17 years, with loss-free accounts generally up +20% to +50%.”
In many instances, cedents retained more risk rather than accepting unfavourable terms, Guy Carpenter said, adding, “While lower-layer capacity and aggregates remained highly constrained, new capital raised by existing market participants and growing appetite by other established reinsurers saw overall capacity levels rebound.”
Paul Moody, CEO, UK, Guy Carpenter, said, “Capital providers’ attitudes have shifted in recent months as overall return expectations have improved following this year’s major market correction.”
Meanwhile, the casualty market continued to trend in a “cautious direction”, with Guy Carpenter noting that reinsurers are closely monitoring prior-year loss development as well as the moderating underlying rate environment.
“Client differentiation remains critical to renewal outcomes, sufficient capacity was generally available when the market clearing pricing was set,” the firm said.
Turning to cyber, Guy Carpenter noted that quota share remains the prevalent reinsurance structure, often purchased in conjunction with aggregate coverage.
The firm continued, “Overall, capacity for quota share has become more readily available in the cyber market given improvements in underlying rate and portfolio performance. Aggregate capacity, pricing and terms remained stable at mid-year.”
Elsewhere, catastrophe bonds are experiencing a “record first half of the year”, Guy Carpenter observed, adding, “The majority of bonds in the first half of 2023 were oversubscribed in demand and priced either within or below guidance. On average, spreads for cat bonds decreased by double-digits compared with the fourth quarter of 2022.”
David Priebe, Chairman, Guy Carpenter, commented, “Amid the capacity rebound, a highly viable and revitalized insurance-linked securities market has emerged with a flurry of activity occurring in the first half of 2023. At Guy Carpenter, we are committed to enabling our clients to anticipate and navigate this ever-changing marketplace.”
Dean Klisura, President & CEO of Guy Carpenter, said, “Price adequacy across lines and supportable structures are expected to continue to drive sufficient capacity levels.
“For cedents, higher levels of retained risk across the business in 2023 will most likely impact volatility in 2024, necessitating strategic portfolio management.”
