A rebound in reinsurance industry capital, prompted by strong reinsurer earnings, should help keep reinsurance pricing in check during 2024 renewals, according to sources and recent industry reports.

Bolstered by improved earnings in 2023, after significant price hikes in 2022, reinsurers have an increased risk appetite this year, they say.

In addition to more traditional reinsurance capital, insurance-linked security issuance has grown, providing more reinsurance and retrocessional reinsurance capacity, they say.

A key development driving the improved market for reinsurance buyers is the rebound in global reinsurer capital to $670 billion at the end of 2023 from $575 billion at the end of 2022, much of which has come from robust reinsurer earnings.

“The biggest form of new capital is the earnings being generated by the established companies … a decent chunk of which is going to get redeployed into the market,” said Mike Van Slooten, head of business intelligence for Aon PLC’s reinsurance solutions division in London.

Strong earnings also have translated into confidence in deploying capital.

“You’ve got reinsurers coming out of a very profitable year. They’ve got plenty of capital and their risk appetite is growing,” said James Vickers, London-based chairman international, reinsurance, at Gallagher Re, a unit of Arthur J. Gallagher & Co. “A lot of that, interestingly, is self-generated. There’s been very few new capital raises or new capital coming into the market.”

Recent April 1 reinsurance renewals, across Japanese and other Asian markets, and to a smaller extent in the United States, showed muted price increases or flat renewals, and even some decreases.

“Reinsurers had more of an appetite for writing more business given the still-favorable pricing environment and the capital positions that they have rebuilt thanks to strong earnings in 2023,” said Taoufik Gharib, senior director, North America insurance ratings, at New York-based S&P Global Ratings Inc.

Average prices are unlikely to fall much, however, if at all.

“We believe reinsurers will continue to post strong results, and pricing in short-tail lines should hold firm over the remaining renewals in 2024,” Mr. Gharib added.

The ILS sector is also providing capital to insurers and reinsurers after a record 2023 volume of $15.4 billion.

Aon Securities said in a report last week it estimates that overall ILS capital has grown to $108 billion, a 16% increase since the beginning of 2023 and an all-time high.

“One area that has shown clear growth over the last two years is cat bonds,” Mr. Van Slooten said.

First-quarter 2024 “saw a continuation of record-setting cat bond activity across a range of perils, structures, and cedent types, potentially setting up 2024 for a second consecutive record issuance year,” Gallagher Re said in a report last week.

The increased capital and growing risk appetite among reinsurers may be a good sign for U.S. insurers heading into June 1 and July 1 reinsurance renewals.

“Earlier renewal discussions are happening on a significant number of U.S. midyear renewals, with reinsurers ready to provide indications and lock in capacity. There is a broad desire amongst catastrophe reinsurers to write larger lines in 2024, and supply will be available for insurers looking to purchase additional limit,” the Aon report said.

Sources also noted that retrocessional markets, where reinsurers cede coverages, have been bolstered by the increased capital and ILS issuance, providing reinsurers with greater certainty and added market confidence in deploying capital.