Analysts at Moody’s have highlighted how the reinsurance industry witnessed strong results in 2023, despite a continued elevated level of catastrophe activity, which saw more than $100 billion global insured losses.
Moody’s explained that development, which came after many years of challenged results, was aided by a number of factors.
This included: improved pricing, higher portfolio investment yields and the mix of catastrophes last year – including a number of few high severity events, such as hurricanes, but more small events, such as thunderstorms, that had to be retained by primary carriers.
For 2024, Moody’s stated that it sees pricing remaining largely favourable, with reinsurance rates generally up 0-10% at 1/1 renewals, and April and mid-year renewals also likely to remain firm, with expected modest price increases.
However, beyond 2024, the outlook for 1/1/25 renewals will depend on the level of capacity entering the market and the level of catastrophe losses, the credit rating business noted.
Moreover, in terms of new capacity, alternative capital increased solidly last year to the current ~$100 billion level. This was mostly driven by a record $15+ billion of catastrophe bond issuance, which even included some covering cyber risks.
In addition, Moody’s noted that the reinsurance industry should be able to produce “quite strong profitability” at the current pricing level, assuming an average year for catastrophe losses.
However, the firm is said to be “keeping an eye” on casualty reserves for 2015-2019 accident years, which is a major area of concern given the risk of further adverse development industry-wide.
