Analysts at JP Morgan have reported that the “resounding view” from reinsurers is that the hard market conditions experienced at the January 2023 renewals are “here to stay” for at least the remainder of the year.
Looking ahead to the coming renewals in April and at mid-year, JP Morgan believes that pricing increases, higher retentions and improved terms and conditions will reflect the example set at 1/1, although with some variations between regions.
The firm notes that the strongest reinsurance pricing in memory was realised at the January renewals, with price increases ranging from 2.3% on a fully risk adjusted basis at Munich Re to 9% at SCOR.
Property catastrophe business clearly saw the greatest increases in any class of business with price increase of around 30%, although volumes were more mixed with SCOR and Hannover Re both shrinking their top lines, suggesting substantial reductions in exposure.
In contrast, JP Morgan observes that Swiss Re grew its top line by 13%, but notes this was slower than nominal price increases of 18%, again suggesting that exposure reduced year on year.
Munich Re likewise grew but only by 1.3% which likely reflects the shift from proportional business to better priced XL business, analysts added.
On retentions, JP Morgan observes that reinsurers in general made efforts to get further away from the risk at January, with Swiss Re having reported that its retentions had increased by average 50% year on year.
“The beginning of January seems a long time ago now, but we now have all of the data on renewals from the European reinsurers,” JP Morgan wrote. “Heading into the January renewals, we had been bullish about the prospects for the reinsurance industry to re-set profitability and change programme structures to move the reinsurers further away from the risk.
“On the pricing side, the outcome did not disappoint, with all of the reinsurers reporting their strongest renewals on price in memory with volume trends a little more mixed overall.”
Looking ahead, JP Morgan remains positive on reinsurance and expects conditions in 2023 and the conservative approach employed by the largest names to prove favourable as the year progresses.