The property catastrophe reinsurance market is much more predictable and smooth than it was a year ago, and while there’s been a notable increase in demand for protection from clients, the potential for another year of $100 billion+ in insured natural catastrophe losses means there’s caution in the marketplace, according to Dean Klisura, President and CEO, Guy Carpenter.
Speaking recently during Marsh McLennan’s Q2 2024 earnings call following another solid set of results, characterised by continued organic growth across the business, Klisura commented on the property cat reinsurance market.
He described a more stable marketplace in 2024 than in the hard market for property cat in 2023, noting that placements have been completed on time, with adequate capacity in the marketplace for clients.
“There’s an increased reinsurer appetite in the market, and we know why,” said Klisura. “They’re driving 20% plus ROEs in this market given the rate increases of last year, and the higher attachment points our clients have been forced to absorb, with greater volatility. We’re seeing very strong ILS activity in the market. John noted record cat bond issuance in the quarter, 34 discrete cat bonds, some $8 billion of limit in the quarter.”
Klisura went on to note that there is evidence of moderating cat rates when compared with last year, but stressed that it has not yet gone negative in the market, with year-over-year premium spend for property cat, and Guy Carpenter’s rate on line index, still up 1% year-over-year.
“And really, as John noted, I think the headline, the key takeaway is significant increased client demand for additional property cat limit. In the first half of the year, two thirds of our US clients bought more property cat coverage across an additional $10 billion of limit, which is truly significant in the marketplace.
“We’re also seeing clients, reinsurers buy more retrocession coverage, with improved pricing, market dynamics, improved appetite by sellers, both rated and ILS vehicles in the market,” said Klisura.
The last headline in the property cat reinsurance space, according to Klisura, is that there’s caution in the market.
“There’s $50 billion plus of insured losses in the first half of the year. When you think about severe convective storms in the US, in Japan, Taiwanese earthquake, floods in Germany, the UAE, the Baltimore bridge collapse, hurricane Beryl. I mean, we could be on track for another $100 billion dollar year of insured losses. So, there’s caution in the market around property and property cat,” he said.
