Loss hit US property reinsurance rates rise up to 50% at renewal: Gallagher Re

While the lack of significant US wind loss events in 2023 has helped to moderate the outcome for many property catastrophe reinsurance renewals at 1/1, US reinsurance towers that had seen losses over the course of the year have experienced rate-on-line increases of up to 50%, broker Gallagher Re said today.

Overall, Gallagher Re echoes the other broker reports, in stating that the global reinsurance market was a far more stable affair at January 1st 2024, than it was a year earlier.

In particular, the property reinsurance market was seen as much “healthier” a sharp contrast to the stressful and late renewal of the “volatile” property reinsurance market at the start of 2023.

But stability doesn’t mean softening, or even broadly stable rates, it seems, as reinsurance markets have continued to push through higher rates-on-line for cedents that had been loss impacted or made recoveries on their programs.

Gallagher Re CEO Tom Wakefield commented, “Property supply and demand has snapped back into balance, with returns for the first three quarters of 2023 exceeding reinsurers’ increased cost of capital, underpinned by the exceptional structural changes achieved last year. Retained earnings, modest new capital raises, ample retrocession capacity and buoyant ILS markets combined to increase available catastrophe reinsurance limit, resulting in a much calmer renewal period.

“Signs of over-placement on well-structured programs also indicate an improving position for some buyers going into 2024.”

The property reinsurance market remains a mixed bag though, with ample capacity for tail-risks at the higher layers of reinsurance towers, resulting in some pressure on rates, but still a dearth of reinsurance capacity for frequency risks, aggregates and lower-layer occurrence contracts.

Across the globe, loss impacted reinsurance renewals have seen the steepest rate-on-line increases, Gallagher Re’s renewals report shows.

The United States is one of the leaders here, with rate increases of up to 50% for both risk-loss and catastrophe loss affected reinsurance towers, while loss free saw rates settling from flat to up 10%.

Italy, another region affected by weather related catastrophe losses in 2023, saw catastrophe loss hit reinsurance programs renewing up 25% to 50%, while Europe, as well as central and eastern Europe, saw rates rising by up to 45%.

The Nordic countries saw catastrophe loss-hit rates-on-line rising by as much as 30%, while the Middle East and Africa saw cat loss programs renewing up by as much as 25%.

Catastrophe loss hit reinsurance towers also renewed up by as much as 30% in Germany, 15% in France, and Austria by 15%.

In Asia Pacific, catastrophe loss hit reinsurance renewals in China saw rates rising by 25% to 30%, while in Indonesia this was by 15% to 20%, and Korea by up to 15%. While Australia saw no catastrophe loss hit rate movements reported, risk loss hit rates-on-line were up by as much as 30%.

Loss free rates rose in many cases and reports of rates declining are few and far between in property reinsurance, as the market clearly demonstrated the desire to hold onto the gains made in 2023.