Hurricanes to influence property rates in 2025. Cat bond issuance to be elevated: Doyle, MMC

John Doyle, the President and CEO of Marsh McLennan, parent company to reinsurance broker Guy Carpenter, said just now that because of the recent hurricanes, an impact is expected on property insurance and reinsurance pricing for 2025, while he also said that the catastrophe bond market is expected to see elevated issuance over the coming months.

Doyle is speaking during the Marsh McLennan earnings call and in his introductory remarks gave some insights into key drivers and market dynamics for the rest of 2024 and into 2025.

With hurricanes Helene and Milton set to drive tens of billions of insurance and reinsurance market losses, it is no surprise they deserved a mention.

Doyle said, “In reinsurance, demand continued to rise and capacity remained adequate in the quarter.

“While it is too early to know the ultimate insured losses from hurricanes Helene and Milton, we expect there to be an impact on 2025 property insurance and reinsurance pricing.”

Which suggests the broking giant is already setting out expectations for the end of year renewals of property catastrophe reinsurance here with this signalling, which aligns with others that have said the hurricane losses likely put paid to hopes of a broad softening in property reinsurance lines at the January 2025 renewals.

Dean Klisura, CEO of Guy Carpenter also commented on the impacts of the hurricanes and what they might mean for reinsurance renewals.

“As we entered the fall conference season, ahead of Helene and Milton, I think our clients and we anticipated a very competitive market environment at the upcoming January 1 property cat renewal. I think post Milton, you know, it’s still early, but I think we see a flattening of pricing in the property cat market at the upcoming January 1 renewal,” Klisura said.

Continuing, “If you think about kind of lower and mid level layers and programs, we kind of see risk adjusted flattish at this point, without all the data in and you could still see some softening, some rate reductions in more, you know, remote risk layers in property cat towers.”

Klisura also said, “It’s early. We’re still in wind season. There could be additional cat events over the next several weeks that would shape the market. It’ll be several weeks before we have sufficient claims data to make accurate loss estimates and those impacts on our clients. Right now, we’re just relying on all of our cat modeling partners to come up with some of those estimates.

“But to sum it up, I would say overall property cat demand should increase at January 1 from our clients. We think capacity in the marketplace will be adequate. We think the renewal will be manageable for most of our clients. The market is well capitalized to trade forward and meet client demand. And keep in mind, I think the headline, is the majority of the cat losses this year will be borne by our clients, given the high attachment points that were imposed on them after Hurricane Ian two years ago.”

Doyle also mentioned insurance-linked securities (ILS) in his opening remarks, an area of opportunity for his firm as a key facilitator of issuances, but also for the clients of both Marsh and Guy Carpenter.

“Cat bonds, which posted record volume in the first-half, remain likely to have elevated issuance activity through year-end, driven by a heavy maturity schedule,” Doyle said.

Which is a positive sentiment for the catastrophe bond market. With ILS instruments able to offer an alternative to traditional reinsurance, from what is a diversifying and efficient capital source, it is likely the cat bond market will benefit from continued high demand for catastrophe cover.