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Jan. 1, 2024, reinsurance renewals look set to be less contentious and economically painful for cedents than last year, with ample property and property catastrophe capacity available, but coverage is still expected to come at a higher price.
Clouds may be forming over the casualty sector, though, as experts point to concerns over loss development, but there has not been any substantial capacity pullback, they said.
Property reinsurance pricing should rise but not as sharply as last year, partly due to better communications between buyers, sellers and brokers, said John Welch, Stamford, Connecticut-based chief underwriting officer for Aspen Re, the reinsurance unit of Aspen Insurance Holdings Ltd.
“Expectations have been set on both sides. I think pricing will go up, but clearly not to the extent it did last year,” he said. Some cedents with loss histories will likely “need to pay more,” he said.
At Jan. 1, 2023, renewals, brokers and reinsurers reported rate hikes of between 40% and 100% for North American property exposures.
Aspen Re plans to deploy additional capital into the property sector at Jan. 1. “We will probably deploy some more capacity – not significantly more, just a little more in the property space,” Mr. Welch said.
Brokers are helping to manage cedents’ expectations for renewals, said Sharry Tibbitt, Warren, New Jersey-based global head of property and deputy chief underwriting officer of the reinsurance division at Everest Group Ltd.
“It seems like everybody’s expectations are aligned to some degree. Certainly, the brokers are helping to prepare their clients a lot better. I think people were not prepared whatsoever last January,” she said.
“Buyers a year ago didn't know what to expect,” said Justin Lorence, Minneapolis-based senior broker and co-head of property for Lockton Re.
This year-end renewal season should be less tumultuous. Over the past year, each successive reinsurance renewal at April 1, June 1 and July 1 was “incrementally more orderly than the prior,” and there was a “relatively stable supply” of capacity, he said.
But still, property reinsurance prices are likely to rise again at Jan. 1, Ms. Tibbett said.
“I think you will have to pay more than you want to pay. I think that’s the bottom line right now,” she said.
The increases, though, are now being properly budgeted for. “As the year went on, people understood the expectations and budgeted properly. In April, May, June, July, while we were still getting rate increases that were needed and restructuring as needed, they were able to get it done, because they understood how to budget,” Ms. Tibbett said.
“The market will be orderly this year,” said Monica Ningen, Armonk, New York-based CEO of U.S. property and casualty reinsurance for Swiss Re Ltd. “Prices still need to continue to go up when it comes to property catastrophe exposure but not the big price increases that we saw last year.”
More recently, concerns have been raised about casualty reinsurance, Ms. Ningen said.
“The primary carriers are talking about casualty business. They’re talking about the uncertainty that they see and whether or not it can make money going forward without additional rates there,” she said.
“The loss development on the casualty side is concerning a lot of people,” Ms. Tibbett said.
Executives speaking on recent third-quarter earnings calls raised the issue, she said.
Doug May, Seattle-based president of Gallagher Re North America, said there has not been any meaningful withdrawal of capacity from the casualty reinsurance market.
“At the end of the day, reinsurance is about supply and demand, so if there are no big departures, in terms of capacity for casualty placements, we would expect a renewal which is a version of the previous few renewals. That being said, there could be pressure if an individual portfolio has some loss development,” Mr. May said.