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Strong appetites from traditional reinsurance and alternative capital providers have resulted in excess capacity that has served to drive loss-free property catastrophe rates down between 5% and 15% at the January 1st 2025 renewals, according to Guy Carpenter.
However, the reinsurance broker also said this morning that loss-impacted property catastrophe renewals saw some layers with price increases of as much as 30%, so it was far from a down market it seems.
But Guy Carpenter qualified that by saying, “There was a range of pricing outcomes that varied by region, attachment point and reinsurer views of price adequacy.”
Guy Carpenter notes consistent over-subscription in the market at the 1/1 2025 reinsurance renewals for property catastrophe contracts.
Reinsurer appetite increased by between 10% to 15%, the reinsurance broker estimates, but demand only rose by roughly 5%, resulting in more capital to match with risk than was required.
Rate reductions and additional capacity reflected another profitable year for reinsurers, with returns on equity estimated at 17.3% by Guy Carpenter’s composite, as well as an estimated 6.9% increase in dedicated reinsurance capital to $607 billion.
However, there was also “Continued reinsurer discipline around property catastrophe program attachment points and pricing,” Guy Carpenter noted.
But alongside this, “Meaningful cedent actions to improve underlying portfolio profitability,” including on rate improvement, limit management and more disciplined risk selection.
“It is critical that reinsurers take a long-term view and are constructive partners for our clients,” Dean Klisura, President & CEO of Guy Carpenter said. “Renewal outcomes at year-end reflect reinsurers’ positive property experience over the last two years and casualty portfolios that are well-positioned for future profitability.”
In 2024, reinsurers shouldered roughly 14% of global catastrophe losses, which is down on the pre-2023 average of 20% and reflects the higher attachment points that have made 2024 another very profitable year for the reinsurance sector, Guy Carpenter explained.
“Given the increased catastrophe attachment points of recent renewals, supplemental purchases, such as frequency protection and other retention buydown options, play an important role in bringing balance to the market and ensuring reinsurance is impactful on cedent capital and volatility management,” the broker said.
We’d reported just last week that analysts have explained the importance of sustaining attachments, even if prices wane in property catastrophe risks.
It is the higher attachments that have enabled reinsurers and also many insurance-linked securities (ILS) players to sustain and deliver adequate profits over the last two years.
All this year, brokers have been talking about trying to equalise the sharing of profits somewhat through rate reductions, which now seems to have been achieved at the January 2025 renewal season.
But, the fact attachments and terms have largely stuck is encouraging for the reinsurance and ILS capital providers and the chance of generating profits over the coming year, in a normal/average cat load environment.
However, the market remains disciplined it seems, with loss-affected property catastrophe layers sometimes seeing steep rate increases.
Guy Carpenter explained that loss-impacted layers of property catastrophe reinsurance towers saw adequate capacity, but their risk-adjusted rates ranged from flat to 30% increases, across regions such as the US, Europe and Canada.
“Overall, cedants continue to manage reinsurer partnerships holistically – trading across product lines and treaties. This is critical in the current environment where market conditions vary across property and casualty lines,” the reinsurance broker concluded.
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Excess capacity drives loss-free property cat rates down 5% to 15% at renewal: Guy Carpenter was published by: www.Artemis.bm
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