Reinsurance in focus for investors, with length of hard market key: Berenberg

Equity analysts from investment bank Berenberg have said that, in recent meetings with investors the reinsurance sector has been a focus of their conversations, with investors particularly keen to gauge how much longer the hard reinsurance market can last.

While these investors are typically equity allocators, the sentiment reads across to the insurance-linked securities (ILS) sector, where investors and allocators to ILS are equally as keen to identify the sustainability of hard market conditions.

Perhaps a more accurate way to phrase it though, is the sustainability of the current market reality of higher attachments, stricter terms, less exposure to secondary perils, all of which appear to carry more weight than actual price alone, for many investors, no matter what structure or instrument they are allocating to the reinsurance sector through.

Berenberg’s analysts paint a picture of a sector now attracting investor interest from a broadening range of allocators, with generalists as interested as those deemed more specialist.

The analysts said that the main focus on the reinsurance side is, “what could derail both pricing in reinsurance and the shift of frequency losses back to the primary insurers.”

Alongside that, the generalist equity investors see reinsurers as a good source of returns from dividend growth and share buybacks.

The analysts said that, “there is more interest in reinsurance than we expected, with investors trying to
gauge how much longer the current hard market cycle can continue.”

Which as we said, reads across positively and correlates with the appetite for ILS investments we’re currently seeing from our investor community.

As we reported after our recent ILS NYC 2024 conference in New York, end-investors are clearly attracted to ILS and reinsurance right now, but say that more than one year of evidence of the improvements and sustainability of the new reality, is required.

As we also reported from the conference, investor interest is resurging, but allocators are also determined to manage their capacity and match it to the market environment and opportunity.

Which underscores the growing investor interest in reinsurance, same as Berenberg’s analyst team has been seeing, but also matches the desire to understand how sustainable the new reality of improved returns, reduced frequency loss exposure and higher attachments will last.