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Reinsurers mostly view global catastrophe risks as well priced, says KBW

19th September 2023 - Author: Saumya Jain

Following meetings with executives at the recently held 2023 Rendez-Vous de Septembre (RVS) in Monte Carlo, KBW has reported that the majority of reinsurers view global catastrophe risks as well priced, with overall risk-adjusted rates expected to be flat to up modestly at the January 1st, 2024, renewals.

Flat to modestly rising reinsurance rates are anticipated even if the reminder of the Atlantic hurricane season is benign, say analysts.

While the executives KBW met with see U.S. cat risk in particular as well priced, one did suggest that property per-risk is still underpriced, which could lead to modest pricing increases at 1.1.

“Similarly, one broker suggested that cedents that either didn’t completely fill their programs in 2023 or that papered over catastrophe treaty reinsurance protection gaps with direct and facultative coverage could feel a little more “pain” during 2024 renewals,” notes KBW.

After the efforts made by reinsurers throughout the 2023 renewals, KBW says that it heard almost no indications of reinsurance companies reconsidering the material increases in attachment points, suggesting discipline will remain heading into 2024.

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“Several executives noted that while they don’t expect to reverse last year’s rate increases, terms and conditions represent an event starker “no-go” area. There is still very little reinsurance appetite for aggregate covers,” explain analysts.

On demand, it’s clear from KBW’s discussions that sellers expect growing industry-wide demand for catastrophe reinsurance protection in 2024, as buyers look to offset rising exposures.

In terms of catastrophe capacity, executives described total reinsurance capacity as adequate.

“The broad sense is that capital inflows to date (including a small number of new company formations in progress, along with strong catastrophe bond issuance and some ILS investors’ stable or growing interest at current expected returns, all of which could aggregate to about $15 billion, or about half the reinsurance industry’s post-Katrina capital inflows) remain too low to materially disrupt overall discipline,” says KBW.

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