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MONTE CARLO, Monaco – The world’s largest reinsurers plan to push through further rate hikes at year-end reinsurance renewals, building on the significant increases they imposed on cedents at renewals earlier this year.
While the Jan. 1, 2024, renewal price increases likely won’t be as severe as Jan. 1, 2023, renewals, continued large catastrophe losses and inflation will drive prices higher, they said during presentations at the Rendez-Vous de Septembre reinsurance meeting this week in Monte Carlo, Monaco.
The meeting marks the traditional start of the reinsurance renewals season, with much of the focus on property reinsurance pricing. The four largest European reinsurers – Munich Reinsurance Co., Swiss Reinsurance Co. Ltd., Hannover Re SE and Scor SE – all gave presentations during the meeting of their view on the market.
Despite significant price increases at year-end 2022 and during mid-year 2023 renewals, rates will likely rise again at year-end, said Jean Paul Conoscente, New York-based CEO of global property/casualty at French reinsurer Scor.
“Last year, the price increases on property cat were around 40% to 50% year-on-year. We don't expect increases of that magnitude at all this year, but still likely double-digit — probably call it low double-digit,” he said.
Changes in retentions at recent renewals also meant that insurers retained more risk, Mr. Conoscente said.
Overall, pricing needs to increase further for both cedents and policyholders, he said.
Traditional reinsurance market capital stands at about $461 billion, which is lower than the 2021 record high of $475 billion, and alternative capital, such as insurance-linked securities, has stagnated at around $100 billion for the past five years, said Thomas Blunck, CEO of reinsurance at Munich Re.
“We don't have a massive capital inflow and that means the market dynamics are not changing,” he said.
With years of elevated catastrophe losses due to climate change and historically high inflation rates, reinsurers are facing increased exposures, which will lead to higher rates and other changes, such as increased attachment points, reduced scope of coverage and adjusted commissions, Mr. Blunck said.
The North America reinsurance market saw the biggest changes this year with higher prices and retentions, said Sven Althoff, head of property/casualty reinsurance at Hannover Re.
“The capacity squeeze observed at the first of January renewals was becoming a little easier at mid-year renewals, but for 2024 we can expect that the market is going to trend up,” he said.
Inflation will likely drive more demand for reinsurance coverage from cedents, but the market remains “disciplined,” Mr. Althoff said.
While rates have risen substantially over the past year, indexed reinsurance rates are still below levels in 2010, the last hard market peak, said Urs Baertschi, CEO of property and casualty reinsurance at Swiss Re.
Specifically for natural catastrophe reinsurance pricing, rates are at about the same level as 2013, said Gianfranco Lot, chief underwriting officer for the Swiss Re unit.
“We feel it’s not yet commensurate with the risk landscape we’ve seen. Adequate returns have not been reached,” he said.