More welcoming market led to maintained balance at July 1 renewal – Gallagher Re

More welcoming market led to maintained balance at July 1 renewal – Gallagher Re | Insurance Business New Zealand

Reinsurance

More welcoming market led to maintained balance at July 1 renewal – Gallagher Re

ILS and ILS providers moderate their appetites as more cat exposures loom

Reinsurance

By
Kenneth Araullo

In its latest insights covering the most recent reinsurance renewal period, Gallagher Re noted that reinsurance buyers saw a more accommodating market during the July 1, 2024 period compared to recent years.

This shift was anticipated given the near-record returns for reinsurers in 2023, with many exceeding a 20% return on equity. The first quarter of 2024 continued this trend, showing up to a 12% improvement in combined loss ratios.

This has bolstered reinsurers’ capital base and confidence in deploying their capital. Additionally, non-life insurance-linked securities (ILS) capital has grown to record levels, driven by increased investor interest. This favorable trend provided buyers with ample capital and capacity to meet demand.

Property reinsurance saw improved pricing, with risk-adjusted catastrophe placements remaining flat to -10%. Demand for additional capacity was met, including an extra $3 billion to $5 billion for Florida. Predictions of an active 2024 North Atlantic hurricane season have not significantly impacted pricing and capacity for traditional reinsurers.

Read More: April 1 renewal continues “risk on” mantra for reinsurers – Gallagher ReHowever, some ILS capacity providers, ILW capacity providers, and retrocession capacity providers have moderated their appetite for US and Caribbean catastrophe exposures. Economic losses were estimated at $43 billion, and insured losses at $20 billion in Q1 2024, driven by severe convective storms and secondary perils.

Unexpected flood losses in the UAE, Southern Germany, and Brazil in Q2 2024 also reinforced reinsurers’ ongoing discipline on retention levels.

Casualty and specialty sectors

Underwriters in the casualty insurance sector are less confident than those in the property sector, with increased concerns over rate adequacy in the US, driven by adverse development reported by liability insurers in Q4 2023.

Cedants who effectively communicated their underwriting and pricing strategies, supported by strong analysis, achieved successful placements. While supply and demand dynamics remain stable with adequate capacity, there have been minor changes in reinsurer panels, indicating a lack of consensus on underlying issues.

Reinsurers in the specialty lines sector have maintained underwriting discipline, resulting in no capacity constraints for reasonably priced and structured programs, except for UNL retrocession.

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