Reinsurers relax as supply bounces back

Reinsurers are less hesitant to supply coverage to carriers, and this improvement “is no surprise,” Gallagher Re says in its 1st View: Balance Maintained report.

Reinsurer returns were nearly record-breaking and return on equity (ROE) exceeded 20% in many cases. Combined loss ratios in 2024 Q1 showed an improvement of up to 12%, helping reinsurers deploy capital more freely than before.

In fact, July 1, 2024 renewals reflect a market transitioning away from historically-high premium increases in 2023 to one that meets insurer’s coverage demands, Guy Carpenter affirms in a recent release.

“Well-positioned cedents achieved greater concurrency and pricing consideration in this positive-but-still-cautious trading environment,” says Dean Klisura, president and CEO of Guy Carpenter. “However, headwinds, including unsettled macroeconomic conditions and the geopolitical environment, are leading to shifting risk appetites.”

Property  

With this renewal, primary carriers were looking for better terms and conditions as reinsurers were willing to take on higher levels of risk. However, reinsurers were more willing to adjust premiums rather than structure.  

Loss-free property programs generally saw prices ease, even as demand increased. In fact, most catastrophe rates were flat to – 10% overall, according to Gallagher Re. 

In some loss-free accounts, upper layers were risk-adjusted down 10% or more, per Guy Carpenter’s analysis. Most property placements were completed early or on time, though the frequency and severity of large risk losses meant many risk programs remained under closer scrutiny. 

Reinsurers were not particularly affected by Q1 Cats (the quarter tends not to be a major driver of Cat activity, at a historical average of 14% loss), says Gallagher Re.  

Predictions of an active 2024 North Atlantic Hurricane season did not significantly affect pricing and capacity of traditional reinsurers upon renewal, Gallagher Re reports, though some have moderated capacity in the U.S. and Caribbean. 

Hurricane Beryl is heading towards the Caribbean with Category 4 storm activity — the earliest on record for any hurricane season. It is not expected to hit Canada, which is still recovering from its record-setting Hurricane Fiona, which caused $800 million and counting in insured damages to property. 

Casualty 

Though the outlook for property is generally positive, casualty is a different story. 

Depending on the frequency, severity and local factors (such as regional, judicial, economic, etc.), casualty renewal outcomes varied.  

For example, general liability and excess/umbrella placements exposed to U.S. losses experienced continued reinsurance pricing pressure, Gallagher Re reports. Underwriters in the casualty insurance sector are showing increased concerns over rate adequacy in the U.S. 

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