Named-perils first to fall as reinsurance capacity arrived for 1.1

The first reinsurer benefit from the 2023 market reset to show signs of crumbling as capacity returned to the market in 2024 appears to have been the move into defined perils, analysts at AM Best have suggested in recent research. 

“For the most part, reinsurers maintained the named-perils basis in January 2024, but because supply and demand were more easily matched this year and certain deals were oversubscribed, brokers were able to push for limited compromises on terms,” AM Best said of terms from the 1.1. 

In some cases, this meant including additional perils to the named-perils list, analysts said. 

The 2023 market reset had included “great efforts” by reinsurers to move contracts to a named-perils basis, often limiting deals to just earthquake and named windstorms. 

But the balance of risks between cedants and reinsurers is not likely to have been moved significantly following such minor adjustments. The wider set of revised T&C and structures, including notably attachment points, had benefitted reinsurers much more broadly. 

“Attachment points have risen to such a degree that the inclusion of one or two more perils is unlikely to lead to a material difference in the risk covered,” AM Best said. 

At 1.1.2023 and throughout the year, reinsurers not only secured the much-watched head-turning rate gains, but very notably tightened wordings and raised attachment points for XoL treaty to stave off exposure to frequency perils and the rise of many secondary perils. 

For the 1.1.2024, rates rose again, albeit at nowhere near the pace from the prior year. Retentions held as cedants opted for more affordable limit on top rather than trying to patch up prohibitively expensive lower layers. Issues with lower layers, when addressed at all, were said to have gone into structured reinsurance deals.

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