Following a costly 2023 severe convective storm season, Gallagher Re’s Josh Knapp, Executive Vice President, Broking, National, has noted that reinsurers are proving less willing to provide aggregate covers for regional property cat risk, though their overall appetite “remains healthy.”
Knapp’s comments come following a poll in which Gallagher Re surveyed 24 of the reinsurers “most active in the regional market in fall 2023.”
The firm found that the overall dollar amount of capacity to be deployed in property cat coverage for these insureds was “likely to remain flat at January 1, 2024.”
According to Knapp, half of the respondents said that 40% to 60% of their US book renews at 1.1., and, for 59% of reinsurer respondents, regional clients made up at least 40% of their 1.1 renewals.
Gallagher Re’s survey found that 58% of reinsurers planned to write the same amount of property exposure as last year through similar levels of participation in insurers’ cat programs, with 38% planning for modest growth.
The firm also observed that property cat capacity will more likely be deployed in excess layers than aggregates.
“In 2022, the same survey found 37% of reinsurers were unwilling to write aggregate covers. This year, that percentage jumped to 63%,” Knapp explained.
He added that this increase follows a challenging insurance renewal in January 2023, during which reinsurers made less capacity available for working layers and aggregate covers, “amid fundamental shifts in pricing and increases to attachment levels.”
“By contrast, there are now signs that reinsurers are beginning to lean into this market in a more meaningful but selective way,” Knapp wrote.
He continued, “Reinsurers’ desire to shift capacity further up the programs to more remote layers will result in ample capacity at these levels, which could result in a reduction in pressure on rates.
“The challenge for 1.1, therefore, is to balance this dynamic with reinsurers being willing to support programs across the board.”