Global reinsurers remain optimistic about property reinsurance conditions
KBW analysts noted that top managers of reinsurance companies remain very optimistic about underwriting profits, terms and conditions of property catastrophe reinsurance coverage. Forinsurer analyzed the report and highlighted the main points.
“The reinsurers’ only real concession to cedants was in contracts that covered strikes, mass and civil disturbances, as well as significant demand in property risk protection,” KBW analysts explained.
Some reinsurers have recognized that another year or two of good reinsurance performance should help increase capital (traditional capital and/or ILS) deployed in catastrophe reinsurance.
However, KBW noted that almost no one expects the 2023 phase-in of reinsurance rates to change soon, adding that reinsurers remain uninterested in accepting the frequency risk that was previously built into aggregate coverage.
Meanwhile, most reinsurers are increasingly optimistic about Florida’s recent reforms to property catastrophe coverage, but are reluctant to factor it into their near-term rate forecasts and expect property reinsurance prices to be roughly flat through mid-2024.
“We also heard modest optimism about casualty reinsurance pricing trends. Domestic casualty reinsurance remains largely proportional, so there should be a steady increase in the level of primary casualty insurance, complemented by modestly lower risk transfer fees,” adds KBW.
“Significantly improved expected profits justify and predict smaller overall rate increases, even with high social inflation accelerating the number of victims. The 2023 step changes in property catastrophe reinsurance prices and conditions generally persist, while continued rate increases and modestly lower reinsurance commissions should help improve reinsurance margins.”