In a recent report, JP Morgan analyses the European reinsurance market, highlighting its resilience despite record-breaking increases in 2023.
As of the January 2024 renewals, the market continues to show firmness, maintaining positive momentum from the previous year.
Contrary to the dramatic price hikes witnessed in 2023, Howden Tiger reports risk-adjusted price increases of 3% at the recent renewals, a significant drop from the 37% recorded in January 2023.
The moderation in price increases is attributed to a stabilised market, where traditional reinsurers are now more willing to deploy capital due to demonstrated favourable pricing levels in 2023.
Retention changes, which underwent significant shifts in 2023, remained stable year on year, indicating that both pricing and reinsurance structures have not come under pressure.
Industry results for the first nine months of 2023 have been excellent, with major European reinsurers, such as Hannover Re, Munich Re, and Swiss Re, even building buffers into their reported results. Further improvements in margins are anticipated in 2024.
JP Morgan expects reinsurers to report smaller price changes than the previous year but anticipates positive aggregate changes on a risk-adjusted basis.
The disappointment in 2023 regarding volume at the 1.1 renewals is anticipated to be addressed in 2024, with reinsurers potentially pivoting towards growth, backed by evidence of improved profitability.
While the excitement in pricing may not match that of 2023, the reinsurance sub-sector appears robust and well-positioned for continued growth.
JP Morgan maintains an optimistic outlook on the reinsurance sector, anticipating a year-on-year progression in earnings for 2024-2025. The forecast points towards robust and resilient returns, with overweight (OW) ratings specifically assigned to Hannover Re, Munich Re, and Swiss Re.
