Providing insight from the Association of Insurance and Financial Analysts (AIFA) conference 2024, analysts at KBW have noted that reinsurance executives remain very optimistic about the returns embedded in property catastrophe pricing, terms, and conditions.
“The only real concession to cedents so far has been a few contracts covering strikes, riots, and civil commotion, and significant demand (mostly at the top of property towers) that is absorbing some of the capital generated through earnings,” KBW’s analysts explained.
Several executives reportedly acknowledged that another year or two of good reinsurer results should translate into more capital (traditional and/or ILS) deployed into catastrophe reinsurance.
However, KBW noted that almost no one expects the 2023 “step change” in pricing and attachment points to reverse any time soon, adding that reinsurers “remain uninterested” in assuming the frequency risk previously embedded in both low attachment points and aggregate covers.
Meanwhile, most executives at the AIFA conference were said to be increasingly optimistic about the recent Florida reforms holding up, but remain reluctant to embed that in their near-term pricing assumptions and expect roughly stable mid-year property reinsurance pricing.
“We also heard modest optimism about casualty reinsurance pricing trends. Domestic casualty reinsurance remains largely proportional, so persistent primary casualty rate increases should flow through, augmented by modestly lower (so far) ceding commissions,” KBW added.
The firm concluded, “The 2024 AIFA conference was (appropriately, in our view) optimistic about virtually all P&C sub-sectors’ earnings outlooks
“Much-improved expected returns both warrant and imply smaller rate increases overall, even with elevated social inflation accelerating some casualty lines’ rate increases.
“2023’s step changes in property catastrophe reinsurance rates, attachment points, and terms and conditions have broadly held, while persistent rate increases and modestly lower ceding commissions should drive casualty reinsurance margin improvement.”
