RenaissanceRe (RenRe) predicts incremental demand to come into the market throughout the course of 2024, and expects it to be in the single digit billions, according to CEO Kevin O’Donnell, who in a recent earnings call also highlighted that RenRe’s acquisition of Validus Re puts the company in a very good position for the upcoming January 1 renewals.
Bermuda-based RenRe announced the completion of Validus Re acquisition from AIG on November 1. O’Donnell has shared his excitement regarding this transaction and noted that the successful integration of the Validus business will be one of the company’s main focus points over the next year.
He said: “We are pleased to close the Validus acquisition, this transaction builds a solid foundation for the continued execution of our strategy.
“We believe we are in a strong capital position, even after paying for the Validus acquisition, as we approach the January renewals, and focus on deploying our capital into profitable business opportunities in this attractive market.”
The reinsurer is heading into the renewals in a favourable position, O’Donnell stated. Now that Validus is part of RenRe, they are in a different position going into this 1/1 2024 than the reinsurer was going into the 2023 renewals, the CEO pointed out.
“In our property business, last year’s renewals were one of the most dislocated in recent memory. Over the course of 2023, we achieved a significant step change in both rates and terms and conditions. Our customers’ expectations are now better aligned with the market conditions and their reinsurance budgets are likely to have increased,” said O’Donnell
He continued: “Overall inflation, climate change and geopolitical instability have been consistent drivers of exposure. Industry insurance losses in 2023 are likely to exceed a hundred billion dollars once again, this puts more pressure on demand for reinsurance. At the same time. We’ve seen very little new capital into the system. There will be no reinsurance class in 2023 and minimal third party new capital.”
According to the CEO, RenRe has a robust excess capital position and is prepared to meet some of the additional demand. Moreover, O’Donnell noted, Validus allows the reinsurer to afford considerable optionality.
O’Donnell believes 1/1 will be a significantly easier renewal compared to last year’s thanks to the achievements over the course of this year.
“I think buyers have reset expectations. One thing that didn’t materialise over the course of this year is the increased demand that we anticipated. We believe that demand will come in 2024. So, there’ll be relatively steady supply because capital has not been flowing into the business at an accelerated pace. We think there’s increased demand, and that should create a healthy tension for pricing,” O’Donnell stated.
When asked about incremental demand, O’Donnell said that it will come throughout the course of 2024, but it is still too early to put a number on what is available.
He said: “I think the one important point I would highlight is that new demand will come at the more remote layers… I think it’ll continue to be difficult to reduce retention. With that, there’ll be more peak exposure coming. There’ll be some additional supply constraint just because of concentration, which will add to the overall positive rate environment.
“I feel we are in a good position with the Validus portfolio coming on, with our capital position with Vermeer, with Top Layer to play into this quite specifically and should help our overall portfolio, but it’s difficult to calibrate exactly how much of that demand will come into the market, but our expectation is in the billions, single digit billions”.
