Reinsurers ride 2023 renewals pricing past commercial carriers

More and more signs of an enduring hard market for reinsurers is tipping the equity market scales in their favour over commercial primary carriers, analysts at Wells Fargo have said following the April renewal deadline.

Reinsurers trump commercial insurers on the favourites board, with Arch Capital, Everest Re and RenaissanceRe called top plays ahead of commercial leaders Hartford, Chubb and WR Berkley. Brokers now bring up the rear. Everywhere you look, P&C tops life in the Wells view..

“We lean into our positive view on the reinsurance market with the reinsurers representing our top plays within the sector,” analysts wrote.

April reinsurance renewals, while not as dislocated as the 1/1, revealed “a continuation of discipline” and continued capacity constraints, Wells Fargo analysts said of their read.

“We think the reinsurance pricing environment should continue to get better during 2023, and can last into 2024,” analysts wrote. “The recent 4/1 cat renewals is a positive sign with rates +20%, with no losses in the region.”

Commercial insurers, in turn, may have already seen better days. “We have passed the peak of the commercial lines pricing cycle,” analysts wrote.

That could mean a window for investors to buy shares, Wells suggests. Q1 earnings releases will show both the scale of the premium gain from the 1/1 renewals and Q1 cat activity is unlikely to pierce through attachment points and bear losses, Wells Fargo says.

“Further, we think the lack of capital coming into the market during both the 1/1 and 4/1 renewals is a positive sign for the mid-year renewals.”

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