David Flandro, the Head of Industry Analysis & Strategic Advisory at re/insurance broker Howden Tiger, has noted early signs of recovery in the market after capacity was largely impaired last year.
During a briefing on reinsurance trends held on June 1st, Flandro noted it hasn’t fully undergone a change yet, but constraints like the elevated cost of capital, limited capacity and macro uncertainty, while persisting are starting to be offset by some new capital inflows.
This shows a clear growth in appetite on the part of some carriers and possibly early signs of inflation easing.
To analyse capital, the broker undertook a couple of different analyses, the first is a composite analysis starting in 2019, and ending in the first quarter of 2023.
This analysis highlights the drop off in reinsurance capital in 2022, which was extremely significant and it coincided with sharp changes in inflationary trends and interest rates. Although, capital began to recover in the first quarter of this year.
In another analysis of dedicated reinsurance capital, there was a slight difference from composite capital, but largely the same trend is noted.
“In 2022 capital falls, driven by mark-to-market losses and lower capital inflows. But it’s recovering in 2023 and we anticipate that by the end of the first half, it will have gone up significantly,” Flandro added.
Risk and premiums have gone up significantly as well, meaning the solvency margin ratio remains below 100% although this is changing.
Ultimately, this inflow of capital has helped to offset some of the pressures at the June 2023 reinsurance renewals.
