Retrocession demand increased at mid-year reinsurance renewals: Guy Carpenter

There was increased demand for retrocessional protection around the mid-year reinsurance renewals, as existing buyers sought to purchase more retro and some historical buyers returned to the market, according to Guy Carpenter.

The reinsurance broker noted that the majority of sellers of retrocessional protection, both traditional and from insurance-linked securities (ILS) sources, had the appetite to grow their portfolios, helping to service this higher demand.

While the increased supply of capital to support retro also drove higher competition.

But, overall, Guy Carpenter’s market analysis at the mid-year, suggests that retro pricing was relatively stable, as increased demand helped to soak up available capacity, despite still rising competition from markets.

All of which suggests that protection buyers likely secured the majority of cover they were seeking, at what can be an important time for underwriters to balance and hedge their catastrophe reinsurance portfolios.

In its latest reinsurance renewals analysis, Guy Carpenter explained that, “Through Q1, most retrocession buyers sought to secure similar limits to 2023, whereas mid-year purchasing saw increased demand in Q2 from existing buyers along with historical buyers returning to the market.

“The drivers of this increase were improved purchasing dynamics relative to 2023, underlying portfolio growth and active North Atlantic wind season forecasts.”

The reinsurance broker noted that, when it comes to retro buying, the majority of activity tends to occur from January through April, while mid-year retro placements are typically smaller in number, or volumes placed.

It was the mid-year purchases that saw demand increasing though, from the existing buyers, while other buyers came back to the retro market that had perhaps been put off by more difficult market conditions in recent years.

Guy Carpenter noted that, on the retro capacity provider side, “The majority of sellers (both rated and ILS) had appetite to grow their portfolios in 2024, with this intention continuing through Q2.”

Adding that, “The competitive pressure from increased supply seen in Q1 continued and this resulted in quote ranges narrowing.”

While the “Early expectations were that mid-year pricing would reduce beyond Q1,” likely due to the greater availability of capital and higher competition being seen, Guy Carpenter noted that this did not transpire to be the case.

Saying that, “The uptick in demand in late April through to June caused similar pricing levels to hold,” indicating a more balanced retrocession market supply and demand, thanks to increases on both sides.

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