Above the fray: hike in property cat retentions has done the trick
Property cat reinsurance is benefitting far in excess of the gain in rates as new, higher attachment points on treaties has kept reinsurers above the fray of 2023 nat cat events to date.
The hike in treaty attachment points is proving “far more material to the reinsurance industry's risk profile” than the headline rate gain, analysts at the Jefferies equity brokerage told investor clients in a note.
H1 earnings reports from across the field of primary carriers and their reinsurers have shown earnings volatility shift clearly from the reinsurers towards the cedents, analysts claimed of the unfolding Q2 earnings story.
“1H 2023 results are demonstrating that despite elevated insured natural catastrophe losses, reinsurers have incurred a far smaller proportion of the claims than we have become accustomed to,” analysts said.
Comments from the equity brokerage follow early signs of reduced nat cat losses from a number reinsurers despite a costly second quarter for overall insured losses.
Jeffries cited the estimate from global brokerage group Aon of $53bn of insured natural catastrophes in H1, 46% above the 21st century average and heavy US convective storms. Gallagher has chimed in with an estimate of $52bn, while Munich Re estimates $43bn.
“A far greater proportion of claims are now being retained on the insurer's balance sheets, rather than being ceded to the reinsurers,” Jeffries Jefferies said, albeit without publishing any calculations from firms in their own equity coverage universe.
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