Bermuda-based reinsurer RenaissanceRe’s Chief Executive Officer (CEO), Kevin O’Donnell, believes that higher rates will persist in the property catastrophe market.
Speaking recently during the reinsurer’s Q223 results earnings call, O’Donnell explained that RenRe “leaned heavily” into the property cat market during the second quarter, with premium growth being 50%.
He said: “We believe these high rates will persist and markets were driven by losses intended to be geographically concentrated. The current hard market is being driven by equity and ILS investor sentiment and is geographically broad.”
In addition, O’Donnell highlighted how Q2 was an “active renewal cycle” with the mid year renewals in property and a busy period for casualty and specialty.
In the casualty and specialty part of the business, gross premium written rose by just 0.2% to $1.25 billion, reflecting proactive cycle management. The segment’s underwriting result increased from $52 million to $70 million.
Looking at RenRe’s property segments, O’Donnell noted that as anticipated, the major property renewals benefited from “continuous upward rate momentum” and improved terms and conditions. He stated that this brought the market in line with a step change in reinsurance that the reinsurer realized in January at 1/1.
“Rate increases in the US averaged 30 to 50%, with pricing particularly challenged on more risks exposed layers. It is worth noting that the mid year renewals in 2022 experienced about a 10 to 30% rate increase, so increases this year, were on top of a higher base.”
Moving forward, O’Donnell explained that RenRe’s strategy for the renewal was to offer private deals on non concurrent terms with core customers early in the process, which ultimately allowed the reinsurer to achieve higher risk-adjusted rate increases on most programmes, relative to what was available in the open market.
O’Donnell also noted how from RenRe’s perspective, the reinsurer is focused on rate adequacy in its property cat business, highlighting that the firm believes that property cat business is now broadly rate adequate.
“With that said, inflation and climate change will continue to increase risks, which will require ongoing monitoring and careful underwriting,” he warned.
