Global reinsurance prices are poised to grow across all sectors in 2024
Global reinsurance prices are poised for further growth across all sectors in 2024, continuing the recent trend, according to a Moody’s report based on the results of its annual survey of 42 insurers buying property and casualty reinsurance.
The survey results show that the expected price increase is mainly driven by claims inflation, especially evident in property-related sectors, where reinsurance potential seems to be somewhat limited.
Despite the rising costs associated with reinsurance protection, most insurers do not plan to expand their reinsurance purchases in 2024. This indicates that primary insurers are preparing to take on a larger share of future losses.
Reinsurance price growth in 2024 is expected to remain in the mid-single-digit range, a more moderate increase compared to the significant price hikes seen in 2023.
More than 70% of respondents predict an additional increase in property and casualty insurance prices next year. Approximately 44% of the surveyed cedants expect accident reinsurance rates to increase by more than 5%, reflecting the trends observed in 2023.
As for property reinsurance, 40% of participants expect prices to increase by an average amount. Moody’s emphasizes that almost all reinsurance buyers consider inflation to be the main catalyst for price increases, with more than 60% also pointing to reduced reinsurance capacity as a contributing factor.
This development is likely a response to the heightened climate-related uncertainty and the ongoing inflationary environment in the insurance landscape.
As the reinsurance industry continues to grapple with these issues, stakeholders will be closely watching the implications for the broader insurance sector in the coming year.
However, the overall rate of price growth is expected to slow down: the share of respondents who do not expect changes in property reinsurance prices will increase to 30% from 9% last year.
According to the Global Reinsurance Property Catastrophe Outlook report, a small number of insurers believe that property reinsurance prices may even start to fall if the 2023 hurricane season is mild and reinsurance capacity continues to return to the market.
Despite the significant price increases this year, almost 50% of primary groups expect rates to increase by more than 5% in portfolio property reinsurance in 2024.
Notably, this will be the 7th consecutive year of price increases since 2017, when the industry suffered record catastrophe losses due to a very active hurricane season.
Respondents predict the strongest price increases for disaster-affected properties, especially in the U.S. and Caribbean markets, with 52% expecting prices to rise by more than 7.5%, only slightly below the 56% of last year.
Despite property catastrophe prices being the highest in a decade, about a third of primary groups still consider reinsurance prices to be inadequate, up significantly from 13% last year.
The increasing frequency and severity of “secondary risks” such as convective storms, floods and forest fires, combined with the higher severity of claims due to economic inflation, makes it difficult for reinsurers to determine appropriate pricing levels.