shutterstock_1752670949_andrius_zemaitis
Andrius Zemaitis / Shutterstock.com
11 January 2023Insurance

Reinsurance renewal rate hikes could extend into 2024: Moody’s

Reinsurance renewal pricing can continue its upward tear through the next major renewal deadlines on the likelihood that reinsurers and investors will continue to shy away from catastrophe risks, analysts at  Moody's said in comment to the 1.1 renewal shakedown.

“We expect reinsurance pricing to continue to exhibit strength in April and July, the key renewal dates for Japanese and US reinsurance contracts,” Moody's analysts wrote.

The question continues to hang on the outlook for capacity, a factor which had dwindled throughout 2022 on reinsurer fears of loss trend, especially secondary perils, a reduction in capital on H1 market losses, continued decline in retrocessional capacity and a dearth of new inflows.

“To the extent reinsurers and investors remain reluctant to increase their catastrophe risk exposures, the hard market for reinsurance is likely to continue into the January 2024 renewal period,” analysts wrote.

January 1 2023 pricing likely exceeded buyer expectations, Moody's said, when comparing the 1.1 result to its own expectations survey conducted among cedants. Expectation for rate increases had been universal, but only 40% expected property reinsurance pricing to rise more than 7.5%.

In the event, loss-free property catastrophe accounts suffered rate hikes of 25 to 40% in Europe and 25 to 50% in the US, Moody's said of broker reports. Loss-afflicted accounts suffered.

Cedants walked with more risk on their books, either via higher retentions or overall smaller programmes. Earnings volatility shifted to the primary carriers.

“Although such actions can protect expected underwriting margins, the increased retention of catastrophe risk will result in the potential for higher earnings volatility for primary companies,” Moody's analysts wrote.

Tighter terms and conditions and an inability by some firms to secure aggregate reinsurance covers will further the shift in earnings volatility towards primary carriers, they said.

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.

Already registered?

Login to your account

To request a FREE 2-week trial subscription, please signup.
NOTE - this can take up to 48hrs to be approved.

Two Weeks Free Trial

For multi-user price options, or to check if your company has an existing subscription that we can add you to for FREE, please email Elliot Field at efield@newtonmedia.co.uk or Adrian Tapping at atapping@newtonmedia.co.uk


More on this story

Insurance
5 April 2023   Stable demand and calmer capacity have left the market pre-1/6 ‘in a delicate balance’: Aon
Insurance
6 April 2023   Commercial insurers may have ‘passed the peak’ of their own pricing cycle.
Insurance
24 May 2023   Moody’s warns on volatility as RenRe ascends to top five P&C reinsurer with the deal.