The FY2023 reporting season concluded in Q1 and saw many companies reporting some of the best reinsurance underwriting conditions in over 20 years. The radical redistribution of risk between primary and secondary markets in property catastrophe and specialty segments during 2023 stimulated a greatly improved equity story for reinsurers. Recent results have vindicated that optimism, with reinsurer valuations much improved after several years.
Executive Summary:
- In the property catastrophe space, the 1st of April saw a continuation of reinsurance markets moving to "risk on" in the search for growth, resulting in increased available capacity at the top end of programs and incremental improvement in risk adjusted pricing at firm order terms.
- In the property arena, the quoting process was disciplined and predictably most reinsurers were reluctant to open the bidding with discounts, although many led with a desire to take increased shares.
- In the US market, client demand for additional limit was satiated. Year on year pricing comparisons are not possible as new layers have no comparable, however, capacity was readily available for the top end of programs at pricing that was in line with the underlying placements — bringing an end to any requirement for inverted pricing.
- In specialty classes the quoting process was made more complex with structural changes, including some increased retentions. However, in the final analysis, specialty reinsurance and retro pricing moderated just slightly more than the catastrophe market albeit perhaps from a higher jumping off point.
- The quotation process for the large Japanese catastrophe excess of loss programs saw an unusual degree of consistency as reinsurers quoted flat to very modest risk adjusted rate increases with few outliers on the upside or downside.
- The market now has more capacity at its disposal, driven by a mix of much improved underlying combined ratios, a light natural catastrophe load (despite insured natural catastrophes across the industry being heavy), and better investment income. This, coupled with increased appetite, should lead to an easing of terms and conditions for clients despite the continued challenges facing the insurance market on natural catastrophe exposure.
Overall, at the 1st of April property and specialty buyers able to access increased capacity were able to firm order and clear programs at improved terms and secure support in critical non-cat areas.
