Reinsurers report increased demand for property reinsurance in 2024
Reinsurers report increased demand for property reinsurance in 2024 Renewals of reinsurance contracts from January 1, 2024 are much more orderly than a year ago, say JMP Securities analysts who talk to reinsurers.
Increased demand for property reinsurance cover is largely being met by the market ahead of January, although there has been an increase in retentions and tighter reinsurance conditions introduced in last year’s update.
In general, property reinsurance rates are slightly increasing (risk-adjusted), with almost no change in the US and moderate increases in Europe.
Reinsurers are cautious about reducing risk transfer fees and tightening reinsurance terms. Ultimately, this resembles a market where reinsurers retain control of underwriting and are likely to continue to deal with specialty risks after the renewal in 2024, especially if the market’s fears about casualty insurance materialize more fully in the coming quarters due to significant losses in 2015-2019 in USA.
JMP analysts highlighted that last year’s renewal of property reinsurance contracts saw the largest increase in reinsurance protection prices in decades. These changes proved to be incredibly valuable for reinsurers, as the industry made significant profits despite natural catastrophe losses totaling more than $100 billion, as the vast majority of these losses remained at the primary level.
Analysts concluded that pricing remained flat or slightly higher, with the US more stable and Europe seeing stronger growth in response to a year of damage from natural disasters, including flooding in Italy, an earthquake in Turkey, as well as storm Ciaran, damage from which insurers estimate at 1.9 billion euros.
In 2023, natural disasters will break several records for losses. A large number of low- and moderate-severity events will result in insured losses of more than $100 billion in 2023, according to estimates by the Swiss Re Institute.
Strong convective storms are the main cause of losses for insurers. This is the first time severe thunderstorms have caused this level of damage to the industry. The cumulative effect of frequent low-loss events, along with increased property values and repair costs, has a large impact on insurer profitability over the long term. The high frequency of severe thunderstorms in 2023 has become a test for the insurance industry.
Losses from severe thunderstorms have steadily increased by 7% annually over the past 30 years. According to Beinsure Media, 2023 marks nearly 90% growth from the previous 5-year average ($32 billion) and more than double the previous 10-year average ($27 billion).
The Amwins Reinsurance Market State and Forecast to 2024 report shows that the reinsurance landscape is undergoing little change with notable rate growth in the property and casualty reinsurance sectors. There are slight changes in the conditions for the extension of optional reinsurance contracts, while real estate reinsurance rates continue to rise.
However, there are signs that the market may soften underwriting and rates in certain risk classes and regions. The renewal of reinsurance contracts on July 1, 2023 was markedly less controversial, marked by a decrease in the number of private placements and an improvement in the consistency of terms of reinsurance coverage. An influx of new reinsurance capacity from London and Bermuda is looking for new opportunities and yields at a time of low interest rates.
Optional reinsurance remains popular, with reinsurers offering capacity subject to compliance with underwriting parameters. Insurers’ own retention has increased, particularly among XoL and E&S programs, to manage natural catastrophe risks.