Moody’s Investors Service’s latest buyer survey suggests that reinsurance prices will likely continue to rise across all lines of business in 2024.
According to the company’s report, based on its annual survey of 42 global property and casualty reinsurance buyers, the anticipated price increases reflect ongoing claims inflation, especially in property lines with somewhat more limited reinsurance capacity.
However, given the increased cost of reinsurance protection, most buyers don’t intend to purchase more reinsurance in 2024, suggesting that primary insurers will absorb a greater share of future losses, reports Moody’s.
According to the ratings agency, prices will rise by mid-single digits in 2024, so lower than many of the increases seen throughout 2023.
Over 70% of respondents to the survey expect further price increases across both property and casualty lines next year. Roughly 44% of respondents expect casualty reinsurance rates to rise by more than 5%, which is similar to 2023.
40% foresee mid-single-digit increases in property reinsurance costs. Moody’s notes that almost all cedants see claims inflation as the key driver of price rises, with over 60% also citing lower reinsurance capacity as a contributing factor.
Moody’s suggests that this is likely a result of climate-related uncertainty and the ongoing inflationary environment.
“However, the overall pace of price rises is expected to slow, with the share of respondents anticipating no change in property reinsurance prices increasing to 30% from 9% last year. A small minority believe property prices could even start to fall if the 2023 hurricane season is benign, and capacity continues to return to the market,” says Moody’s.
Despite significant reinsurance price rises this year, Moody’s says that close to half of primary groups expect rates to lift by more than 5% in portfolio-wide property reinsurance in 2024. Notably, this would be the seventh consecutive year of price increases since 2017, when the industry incurred record catastrophe losses on the back of a very active hurricane season.
“Cedants forecast the strongest price increases in catastrophe-exposed property lines, particularly in the US and Caribbean market, with 52% expecting price rises of more than 7.5%, only slightly below 56% last year,” says Moody’s.
Interestingly, Moody’s notes that despite property catastrophe prices being the highest in a decade, around a third of primary groups still consider reinsurance pricing to be inadequate, up significantly from 13% last year.
“We believe increased physical climate risks introduce greater uncertainty regarding price adequacy. The growing frequency and severity of “secondary perils” such as convective storms, floods and wildfires, combined with higher claims severity because of economic inflation, is making it more difficult for reinsurers to determining appropriate pricing levels,” says the ratings agency.
