Reinsurers not budging on retentions & terms at Jan 2024 renewals: JMP

At the January 2024 renewals, reinsurance markets are not budging on the higher retentions and tighter terms and conditions they have fought had to install over recent years, according to JMP Securities analysts.

Having met with London based brokers, insurance and reinsurance companies lately, the analysts from JMP Securities said, “It quickly became clear to us that this year’s renewal is much more orderly than the significantly dislocated renewal a year ago.”

Increased demand for property reinsurance coverage appears to be being met, but at the same time the market is “not budging from the increased retentions and tightened terms and conditions implemented at last year’s renewal.”

The analyst team came away with the impression that property catastrophe reinsurance renewals for January 1st 2024 are “flat-to-up slightly (risk adjusted), with the U.S. broadly flat and Europe modestly up” in terms of pricing.

“Ultimately, this feels like a market where the reinsurers remain firmly in control and likely continues to have legs beyond the January 1, 2024, renewal, particularly if casualty market fears come more fully to fruition in the coming quarters,” they explained.

The property reinsurance market remains firm and reinsurers remain motivated to keep it that way, with the meaningful changes achieved a year ago having shown significant value through 2023.

The JMP Securities analysts highlight the importance of the higher attachment levels and tightening of terms and conditions.

“Fast forward one year and those changes have proved to be incredibly valuable for reinsurers, with the industry posting strong returns despite more than $100 bln in catastrophe losses taking place, as the overwhelming majority of those losses remained at the primary level following increased attachments,” the analysts said.

Adding, “This proof point has only further solidified reinsurers’ determination to keep these changes intact, and as such we heard of little-to-no concession on this front as this year’s renewals work their way to the finish line.”

The analysts also stressed that Europe is seeing property catastrophe reinsurance rates move higher, with greater increases than most other regions, partly as rates catch-up but also due to recent catastrophe activity.

Finally, the analysts said that reinsurance firms are looking to deploy more capital, but it seems to be largely focused in the mid to upper layers of towers, where cedents are seeking more cover this year.

However, capital does not seem to be being deployed at any cost and, in the majority of cases, more capital is only being assigned where the terms and conditions remain adequate, we understand.

Read all of our reinsurance renewals coverage here.