Reinsurers meet 1.1 capacity demand, but stand strong on terms and pricing
The 1.1 2024 renewals drew sufficient reinsurer capacity to clear the bar, but with discipline holding sufficiently to keep newly fought terms & conditions firmly in place and bring some single-digit risk-adjusted rate gains to global property cat, analysts at reinsurance brokerage Guy Carpenter have claimed.
“A market dynamic is emerging where pricing remains firm, but capital is plentiful,” Guy Carpenter chair David Priebe (pictured) said. “Further concurrency is being achieved in certain areas, providing an important level of consistency in coverage.”
Global property cat risk-adjusted rate changes held averages from near-flat to single-digit gain for non-loss impacted account, but were up 10%-30% for loss-impacted programmes “with a wide range of outcomes around these averages,” analysts at Guy Carpenter wrote.
Pricing pressure was said to be greatest at the lower ends of programmes, offsetting the occasional risk-adjusted rate decrease on the top ends of some towers, said to have reflected “the adequacy of minimum rates-on-line and sufficient capacity.”
Casualty treaties saw pressure on pro-rata ceding commissions as well as excess of loss pricing, Guy Carpenter authors added. Negotiations were said to have been “nuanced and bespoke” but leading to “ample” capacity once basic terms were hashed out.
Overall market capacity was said to have “generally ranged from adequate to ample for completion of programs across classes” wherever hurdles for price and structure were met, “including where additional demand materialised.”
“A more consistent trading rhythm returned to the property market, with capacity deployment outside of frequency-exposed layers and more heavily loss-impacted segments showing meaningful bounce- back, including on new business where reinsurer activity increased measurably,” Guy Carpenter authors wrote.
Dedicated reinsurance capital may have risen by some 10% from the prior end-year reading even without the advent of a 2023 vintage in the field, calculations run in tandem with the AM Best ratings agency suggested. Traditional dedicated reinsurance capital likely rose 12% to $461 billion while alternative capital may have risen 3.7% to $100 billion on the back of $15.2 billion in limit placed on the cat bond market.
Capacity was greased from the retrocessional end as well. Property retro capacity was said to be “available and not constraining reinsurers’ risk appetite,” in sharp contrast to the year-prior renewal.
“Price improvement generally occurred in middle to upper layers, retention levels largely held steady despite growth in underlying portfolios, and terms were more consistent within contracts,” Guy Carpenter analysts wrote of results.
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