At the January 1st, 2024, reinsurance renewals, U.S. property catastrophe rates increased by as much as 50% for loss-hit business, primarily driven by record severe convective storm (SCS) activity, reports Gallagher Re.
The reinsurance broker has released its 1st View Report, which discusses an overall more stable and predictable Jan 1st renewals when compared with last year.
As the report shows, reinsurance rate increases moderated when compared with 1.1 2023, although for loss-hit U.S. business, price rises were still fairly significant after a record year for SCS activity, with losses from the peril reaching an all-time high of around $60 billion in 2023, according to reports.
As a result, Gallagher Re states that loss-hit cat programmes in the U.S. experienced further pressure on retentions, rates, and narrower reinsurer quoting panels. In 2023, primary insurers retained a much greater share of losses from the SCS peril as reinsurers moved away from frequency events, and Gallagher Re’s 1.1 2024 commentary points to a continuation of this trend.
The reinsurance broker notes that reinsurers adjusted their view of SCS frequency to account for the active 2023 storm season, which put additional pressure on pricing.
At 1.1 2024, lower attaching cat layers experienced the greatest pressure on rates, while mid to upper layers benefited from ample supply. Further, loss-hit risk programmes experienced varying levels of pressure on retentions and also a shift from prepaid to paid reinstatements, says Gallagher Re.
In terms of rate movements, Gallagher Re reports that U.S. risk loss-hit programmes saw rate increases of between +7% to +50%, while catastrophe loss-hit programmes saw increases of between +10% to +50%. For both risk loss-free and catastrophe loss-free programmes rates were flat to up 10%, reports the broker.
“Overall, there was an adequate supply of catastrophe and risk capacity and in some cases capacity outpaced demand. But there was greater reinsurer price sensitivity on loss-impacted programs,” says Gallagher Re.
While for loss-hit business pressure on rates persisted for primary insurers, the broker’s report does state that the market dislocation experienced during 1.1 2023 has subsided.
“Reinsurers had clearly defined plans in place for renewal business, which allowed for an orderly quoting process,” reads the report. “Reinsurers returned to a more bespoke, client-specific underwriting approach, heavily influenced by company performance and strategies related to rate, insurance to value, deductibles and other cost sharing initiatives.”
