Reinsurers came through at 1.1, chase top layers & loss-free

Reinsurers brought sufficient capacity to the 1.1 renewals to clear the property books, albeit while holding the line on structures and advancing some rates, while casualty took the comparative heat and cycled out of favour, analysts at reinsurance brokerage Gallagher Re said of the 1.1 renewals just closed.

“Property supply and demand has snapped back into balance,” Tom Wakefield, CEO for Gallagher Re, said in sum of what he called “a welcome return to more stability and predictability.” Retained earnings, “modest” new capital raises, “ample” retrocession and “buoyant” ILS all served the capacity story. 

Reinsurers more than rose to the challenge at the top of loss-free programmes, while continuing to shy away from frequency layers. “Increased demand for top end protection (particularly in the US) has been supported by the reinsurance market’s appetite to deploy capacity, particularly where non-modelled peril activity is deemed remote,” Wakefield said. 

Wakefield is already prepared to forecast “further capacity available” for nationwide and global carriers throughout the rest of 2024. 

In US property, both cat and non-cat rates rose at a single digit pace for loss-free accounts with loss-hit rate adjustment listed at 7 to 50% in non-cat and 10-50% in cat. Supply proved “adequate,” improving at higher levels and with select cases of supply outpacing demand, but with plenty of palpable pressure on lower layers and loss-affected programmes, primarily following severe convective storm activity.

“Buyers with favourable loss experience were able to attract more capacity to their programmes which dampens further pressure on rates and risk-adjusted retentions,” authors wrote. Loss-affecteds, in turn, saw “further pressure on retentions, rates and narrower reinsurer quoting panels.”

For European large programmes, loss-free was up 5-10% (both cat and non-cat) and 15-40% for loss-hit, selectively less in France and Germany. Italian loss-hit cat treaty played catch-up on rate, up 25-50%. Likewise Nordic loss-hit non-cat. Turkey went off the scales following the 2023 earthquake.

Prime European cedants could finally exert bits of leverage. “For desirable loss-free business, the pendulum of control shifted back towards the direction of buyers,” Gallagher Re authors claimed, citing even cases of over-placement on middle and upper layers. “For distressed/loss-affected accounts, it remained a sellers’ market.”

European buyers had some price shock early as reinsurers placed early bids on expectation of heavy cat demand. But reinsurers ultimately showed greater “flexibility” on price, if not on 2023’s heard-earned gains in structures and retentions, as more bountiful capacity became clear, authors suggested. Cat retro came through fully in support. Bermudians may have regained some market share after having taken a back seat to European reinsurers a year-prior.

Aggregate programmes did the suffering in European property, said to be under even greater pressure than in the prior year as an increased number of reinsurers declined such programs across the board. Buyers shifted into multi-year structured deals to plug gaps. 

As that stability came to property, casualty lost its formerly privileged status. “Casualty, notably but not exclusively US casualty, was no longer the valuable currency that was used to support property catastrophe capacity this time last year,” authors wrote. 

Confidence in third party liability lines was said to have “diminished” despite “very significant increases in primary market pricing and limit reductions” put in place over the past three years. “There are concerns over the impact of elevated loss inflation (economic and social inflation) and the impact on both current and forward-looking rate adequacy,” authors claimed. 

International general third-party liability pro-rata commissions were listed flat with XoL rates up 0 to 5% for loss free treaty and 5-12% for loss-hit accounts. Mark France as an outlier with loss-hit account rate gains spanning 0 to 40%. Gains were lightly higher in the US, at 0 to 10% for loss-free and 5-15% for loss-hit. US professional liability was listed flat for loss-free and up single-digit for loss-hit. Mark US healthcare 0 to 20%. London market casualty and financial lines were flat for loss-free and up 5 to 15% for loss-hit. 

In specialty, the deals got done with capacity on hand even as retro capacity remained tight and less supportive.  

“In line with recent years, capacity for specialty lines remained buoyant, with coverage, not pricing being the main challenge,” Wakefield said of results. 

War on ever the new front put more pressure on PV and terror lines. Aviation  “showed signs of stabilizing in the ‘All Risks’ excess of loss market,” and cyber buyers began a shift into non-proportional structures. 

Rates on political violence and terror are up in the high single-digits for loss free and up to 15% for loss hit. Political risk is single-digit loss-free and 10-20% up for loss-hit. Aerospace is single digit for non-cat, but 15-25% for catastrophe treaty. Cyber rates on loss-free aggregate accounts are down by up to 20%.

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