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Giving an outlook for reinsurance renewals in 2025, Kevin O’Donnell, CEO of RenaissanceRe, explained last week that he anticipates retentions will remain around the levels they have been reset to, while rates will trade around current levels, despite an expectation of around $10 billion of incremental property catastrophe demand.
Speaking during the RenaissanceRe third-quarter earnings call, CEO O’Donnell explained that recent catastrophe losses are likely to result in a reinsurance market that is unwilling to move too much on key contract terms, at renewal seasons in 2025.
However, there could be some loss specific discussions to be had, particularly in Florida.
He explained, “We are beginning from a position of strong rate adequacy in our property catastrophe book. This market began hardening after Hurricane Irma, and accelerated after Hurricane Ian. Unlike prior cycles, however, we have yet to experience an influx of new capital, with the exception of certain corners of the market where we do not heavily participate, such as cat bonds.
“As a consequence, the market remains disciplined with reinsurers holding on retentions and terms and conditions. At the same time, demand for reinsurance continues to increase.”
Going on to say, “In 2025 we estimate that US cat limit purchases will increase by about $10 billion. This should lead to new opportunities over the course of 2025 while keeping the rate environment favorable.
“We expect similar opportunities in other property, where Helene and Milton should assure that rates remain at attractive levels.”
O’Donnell further explained that incremental demand for property catastrophe capacity has been continually seen over recent times and this is anticipated to continue.
“That additional demand will help stabilise the pricing environment,” he added.
Further stating, on the January renewals, “So when we go in, we believe rates are fair and adequate for the property cat market and that’s the way we’ll approach the renewals. I think it’ll trade, as we’ve said before, at the new level in which the market reset to in the beginning of ’24.
“Equally important, I think the slips that are in place, with the level of retention, will likely persist as well. So the reset in retentions will continue, and I think rates will be, as with any financial market, but they’ll trade roughly around the level that we’re at.”
Moving on to discuss specific regions and how recent catastrophe loss activity could affect their reinsurance renewals, Group Chief Underwriting Officer David Marra highlighted events in the US and Europe.
“So there has been loss activity in Europe. That’s in the bucket of attritional losses that we’re seeing in North America and in Europe. So it does have the impact of keeping the conversation around stability in retentions and how important that is to the reinsurance market,” Marra said.
Adding, “So we see that US and Europe, we’re expecting stable retentions, stable structures, and the conversation is around price, and as we say the price will trade around the current levels we’re at.”
Then discussing the reinsurance market’s reaction to recent hurricane Milton, RenRe CEO O’Donnell noted that this could lead to some conversations when Florida reinsurance treaties renew at the mid-year of 2025.
“Milton is a Florida event, so I would say that if there are to be lost specific discussions, those will be largely more 6/1,” O’Donnell said. “I also believe that the markets matured a bit, with what happened in ’24 and discussions around loss and loss affected covers and that being the only catalyst for sustaining rate are no longer really a fixture of the market.
“I think everybody recognises that today’s structures and today’s prices will persist.”
Reset in retentions to continue. Rates to trade around current levels: RenRe CEO O’Donnell was published by: www.Artemis.bm
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