Analysts at Berenberg have commented that the outcome of the January renewals looks to be “strong” for reinsurers, but say that it remains uncertain how long hard market conditions will persist.
Berenberg expected the reinsurance market to remain hard at least through 2023 due to broad-brush inflation, consecutive years of high natural catastrophes and the unwinding of near-zero interest rates.
At the renewals, it notes that loss-affected property accounts in the US saw rate increases of 45-100% on a risk-adjusted basis and 25-50% in loss-free accounts
Meanwhile, the European market is also close to a hard market due to concerns about inflation, with risk-adjusted rates up 20-40%, while for casualty market, rate rises on loss-affected programmes were up 5-30% and largely flat in loss-free programmes.
The speciality market, specifically the aviation market, also saw risk-adjusted rate increases of 150-200% due to the Boeing loss and uncertainty about losses from the contingent war cover for leased planes stuck in Russia, analysts reported.
However, Berenberg stressed that: “It is uncertain how long the hard market will be sustained and when capital will return to the sector.”
Overall, the firm said reinsurers with the most favourable outlooks going forward look to be those with the strongest balance sheets and willingness to deploy, with top picks being Munich Re and Beazley.
It also highlighted SCOR and Conduit Re as reinsurers with potential to perform well this year, suggesting they are “ripe for a turnaround in 2023” with hard market exposure, after lagging in 2022.
