Reinsurance supply-demand dynamic still delicately poised: Gallagher Re CEO Kent

At the April reinsurance renewals the supply-demand dynamic in the market remains delicately poised, with little significant new capital entering the market, according to Gallagher Re CEO James Kent.

Overall, reinsurance buyers have paid more for their renewal coverage at April 1st, with increases broadly insisted upon by reinsurers, no matter the territory being underwritten, Gallagher Re has explained.

There was no lack of capacity, but Gallagher Re CEO Kent noted that the April renewal is an “inappropriate” benchmark for how things might pan out at the key kind-year reinsurance renewals, where more US catastrophe exposed business will be priced.

“The overall market supply demand dynamic remains delicately poised with sufficient capacity available at April 1 to meet clients’ needs,” Kent explained.

But he cautioned that, “The renewal cannot be regarded as a true test of market supply demand dynamics,” as the largest capacity requirement at April 1st is for Japan, which “represents a significantly lower than peak US cat exposure demand.”

The true signal of supply-demand and how the market is balancing capacity needs of cedents will be seen in June and July, it appears.

In addition, the renewals in the United States will also see the most significant demand changes as well, it appears, given the strong influence of inflation on US property values and reconstruction costs.

Kent continued to explain that, “Capital supply remained constrained with few signs of fresh capital entering the market and existing reinsurers being impacted by mark to market investment losses.”

Also noting that, “ILS issuance is picking up and remains expensive compared to previous years with pricing and capacity in line with traditional indemnity pricing.”

“The hopes of some buyers that new capacity might enter the market at this renewal– and some signs of amelioration in hardening terms and conditions would emerge– remain unfulfilled,” Kent also highlighted.

Saying that, “This is pushing primary companies back to reexamine their original underwriting strategies, which in the current strained economic environment is extremely demanding to address with original policyholders.”

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