More optimism on retro capacity for 1/1 2024: Mowery, Guy Carpenter

There is more optimising on the potential for retrocession capacity to be more available towards the end of the year for the January 2024 renewals, with conditions having improved and some fund-raising possible, Lara Mowery of Guy Carpenter said last week.

Speaking during a pre-Monte Carlo Rendez-vous briefing held recently, Lara Mowery, the Global Head of Distribution at reinsurance broker Guy Carpenter, painted a more optimistic picture of the retrocession market for the 2024 renewal season.

Retrocessional capacity has been key to reinsurer business models through the last decade, but for 2023 the capacity available shrank, on the back of multiple catastrophe loss years and significant trapped capital among some ILS funds that provide catastrophe retro products.

But, with reinsurance and retro pricing now so much higher and insurance-linked securities (ILS) investor appetite recovering, at least in parts, it seems the end of year renewals may see a greater availability of retro, to satisfy the demand of those looking to buy it.

Mowery explained, “Turning our attention to retrocession, when we look across the property retro and the January 1 2024 renewals, absent of a major loss to retro programmes, there is more optimism for some reinsurers and ILS funds in their ability to attract capital to the property catastrophe space.”

Adding that, “The retro market will continue to benefit from the underlying improved conditions.”

She went on to say that, “There is increased certainty around supply to match demand, but reinsurers have remained clear in their intent to attach away from frequency perils and perceived attrition.”

There remain retro positions where capital is trapped on the back of previous catastrophe events, as well as ongoing uncertainty related to business interruption, we hear.

Mowery noted that, for 2024, “Renewal conversations will include hurricane Ian loss development, as well as 2023 performance.”

Looking ahead to the negotiations and preparations for the January renewal season, Mowery said both sides will be busy preparing.

“We expect to see increased differentiation by markets towards their clients, and how the portfolio is compared with plans,” she explained.

Adding that, “Given previous year price increases, we expect clients to stress-test their current structures to assess where the optimum value and coverage lies.”

Also read: Guy Carpenter urges retro buyers to “create competitive tension”.