In the latest analysis from Moody’s, the January 2024 reinsurance renewals have shown moderate gains as supply constraints eased, resulting in balanced dynamics between supply and demand.
Despite global insured catastrophe losses reaching approximately $108 billion in 2023, well above the historical average, reinsurers posted strong profitability, largely due to severe convective storms in the US and Europe that were predominantly retained by primary insurers.
The solid results for reinsurers were attributed to retained earnings, increased retrocessional reinsurance capacity, robust catastrophe bond issuance, and new capital entering the sector.
This influx of capital contributed to a notable increase in the supply of reinsurance, meeting the market demand.
Primary insurers experienced relief on pricing for the upper layers of reinsurance programs; however, more stringent terms and conditions instituted during the January 2023 renewals remained in place.
Aggregate reinsurance covers continued to be challenging to place, leading to a significant portion of the catastrophe loss burden being retained by primary insurers in 2024.
According to Gallagher Re, reinsurance pricing for loss-free property catastrophe accounts showed moderate gains across regions, with European and US accounts reporting increases of 5% to 10% and 0% to 10%, respectively.
Notably, larger price increases were observed for accounts with catastrophe losses, particularly in the US, where pricing for loss-hit catastrophe programs rose between 10% and 50%.
Casualty reinsurance prices exhibited a firmer trend, with some pressure on ceding commissions for pro rata treaties.
Pricing for loss-free excess casualty accounts remained relatively flat to up 10%, depending on the line and region. Reinsurers remained cautious in the casualty sector due to concerns about social inflation and adverse loss reserve development in older accident years in the US.
The report also highlighted that global insured catastrophe losses have exceeded the long-term average for the seventh consecutive year, reaching approximately $108 billion in 2023.
Despite this, reinsurers have successfully implemented strategies such as raising attachment points, tightening terms and conditions, and restricting aggregate coverages to mitigate the impact on profitability.
The January renewals were largely in line with expectations from Moody’s Reinsurance Buyers’ Survey conducted in September 2023. Respondents anticipated moderate increases in reinsurance prices for casualty and property lines.
The report noted that while upward momentum in reinsurance pricing has been observed since January 2018, the recent renewals indicate a slowdown in this trend, suggesting that the market has adjusted to increased capacity.
Looking ahead, Moody’s expects reinsurance pricing to remain firm in April and July, key renewal dates for Japanese and US reinsurance contracts.
However, the report suggests that the pricing has reached a level attractive enough to draw additional reinsurance capital to the market, indicating a potential stabilisation unless significant catastrophe losses shift the supply-demand balance.
