Property cat reinsurance rate hikes may slip single digit at 1.1: Fitch

Property cat reinsurance rate growth may slow to a single digit pace at the January 1, 2024 renewals as sufficient capacity can be marshalled to meet demand, the  Fitch ratings agency said.

“Fitch believes reinsurance and retrocession capacity for higher layers of property catastrophe risk should be sufficient to meet demand in 2024,” analysts wrote.

“Traditional reinsurers’ have greater appetite for these layers, and selective capital inflows from alternative capital providers will supplement the supply of cover.”

The upshot: “less upward pressure on prices than during the January 2023 renewals.”

In specialty lines, rate developments could “vary widely” depending on recent loss experience. Price increases should be most notable in political risk, terrorism and political violence lines. Elsewhere in specialty, Fitch expects mid-single-digit price increases on average.

In casualty lines, Fitch anticipates low- to mid-single digit price increase with wildcard factors in the social-inflation plagued US market.

Margins have upside at the current stage of the pricing cycle.

“Price increases, and better terms and conditions in 2023, and to a lesser degree in 2024, will continue to support underwriting margins,” analysts wrote.

For 2024, Fitch expects net premiums written to increase by 7.5% to $197.6 billion from an estimated $183.8 billion now estimated for 2023.

The accident-year combined ratio will rise 1.5 points to 95.6%, in part on a notable reduction in favourable prior period reserve development and on a rebound of cat losses after a dip in 2023. Combined ratios in the mid-90s in 2023 and 2024 remain a notable improvement on 2022's 99.7%.

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