Early movers lock in best deals early in orderly 6/1 renewals
Mid-year reinsurance renewals are closing ahead of schedule, with select reinsurers moving to lock in terms ahead of deadline with cedents who are proving better adjusted to the new market reality than could be seen just six months ago at 1/1.
“A much more orderly market for mid-year renewals,” equity analysts from Wells Fargo said in a note to markets following a road trip to Bermuda for talks with reinsurers.
“Our sense is some companies pushed up the time frame of the 6/1 renewals to get the most favourable terms,” analysts surmised. Quotes sat on the table less than a week, versus “weeks at a time” around the 1/1.
Cedents also proved relatively eager to proceed quickly to deals. “The mid-year renewals were earlier, as insureds realised terms would not get more beneficial as we got closer to the renewal,” Wells Fargo analysts surmised of developments.
Arch Capital and Berkshire Hathaway are among likely suspects as early movers.
Arch indicated outright that they got in early with the mid-years, analysts suggested in their review of talks. That more aggressive stance followed word at the company’s last earnings call that Arch could “respond aggressively” to what it considers “excellent” risk-adjusted returns in the property cat markets. That could mean a double-digit increase in peak risk PMLs from a recent reading at 8.1% of tangible shareholder equity to the 10-12% range through July 1, officials said at the time.
Berkshire Hathaway made the list by inference, having given signs of missing out on the bonanza at 1/1, Wells Fargo said of its own understanding. Berkshire Hathaway’s deputy chairman in charge of insurance operations, Ajit Jain, told the company’s May 9 AGM that he had bet heavily on property cat at the April renewals after having been squeezed out of the game at January 1. But Jain had also talked up the size of the bet already placed, saying ““I think we have written as much as our capacity will allow us to write.”
Early treaty renewal announcements from cedents have also pointed to orderly renewals.
The Texas state insurer of last resort, the Texas Windstorm Insurance Association (TWIA), polished off its 2023 hurricane season reinsurance programme early, tying down the final targeted $1.04 billion in traditional reinsurance well ahead of the deadline.
Amongst other major reports, Heritage was said to have placed a $420 million XoL cat programme, United Insurance Holdings polished off a catastrophe reinsurance program for American Coastal Insurance Company, homeowner insurtechs Kin Insurance and Slide Insurance likewise completed programmes and Allstate was said to have been oversubscribed in Florida.
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