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At the January 2025 reinsurance renewals broking group Howden estimates that risk-adjusted pricing for property catastrophe treaty business declined by 8%, while retrocession pricing fell further by 13.5%.
The company titles its latest renewals report “Past the Pricing Peak”, saying that a new phase of the market cycle ushers in price reductions and a renewed focus on innovation.
Howden says that the availability of deployable capacity in the marketplace signals this new phase in the reinsurance market cycle, which it believes marks “a significant shift from the recent past”.
More favourable supply dynamics have become increasingly evident, culminating in capital playing a “pivotal role in the 1 January 2025 reinsurance renewals, fostering competition that led to risk-adjusted rate reductions in several areas,” the broker explained.
With market performance still robust, Howden believes that reinsurance buyers can expect “favourable market conditions to persist in 2025, barring any market-disrupting events.”
The company shared its latest Howden pricing index for primary, reinsurance and retrocession markets, which shows a story of declining prices at the January 2025 renewal season.
To summarise what you can see in Howden’s chart above, risk-adjusted price reductions recorded at the 1 January 2025 reinsurance renewals were steepest in retrocession where rates-on-line fell 13.5%, followed by direct & facultative which was down 12.5%, then global property-catastrophe renewals which fell 8%, London market casualty excess-of-loss which was down 2%
The broker also noted that for the first time since 2017 commercial insurance pricing saw pressure, where pricing across all lines of business came in at -0.9% in 2024.
Citing “notable softening” across the reinsurance market, Howden said that reinsurance demand was stimulated by volatile loss experience, rising exposures and model changes.
But, increased appetite for risk displayed by both traditional reinsurers and capital markets players generated more than sufficient supply, to meet this demand.
Markets adopted a more granular approach at the renewals, with differentiation by client and programme a key feature of the renewals.
Which Howden said indicates “the importance of data transparency” in approaching the contract signings.
For the retro market, where price declines were the most significant, Howden said, “The retrocession market saw another profitable and largely loss-free year in 2024, creating pressure on prices and signings at renewal.”
As a result, Howden sees risk-adjusted retro pricing as having fallen by between 10% and 20% on average at the January 2025 renewals, which it said is “a point estimate within ranges depending on loss experience, exposure, territory and other client-specific conditions.”
Favourable market conditions in global property catastrophe reinsurance meant insurers could navigate challenges from loss experience and secure their placements with rate reductions, with the average decline being 8%.
In the United States, expectations of rate reductions held true and Howden estimates that risk-adjusted price decreases ranged from down 7.5% to down 15%, thanks to prevailing favourable conditions for buyers.
However, in Europe things were different, as loss experienced helped shape the renewal outcome for buyers, with loss-free property catastrophe reinsurance programmes down between 3% and 15%, but buyers in loss affected regions saw “significant upward pricing adjustments” following recoveries made after catastrophe events in the last year.
Tim Ronda, CEO of Howden Re, commented on the renewal outcome and the state of the market, saying, “The re/insurance market continues to present significant opportunity for growth. Companies across the sector are executing strategies that not only meet their cost of capital but, in many cases, exceed return hurdles. Investors should view the sector as one rich with growth potential and attractive opportunities. Encouragingly, our clients are beginning to see relief from the pricing pressures of the last three years in several segments. Even with this relief, we believe that end risk-takers can continue to generate strong returns and provide a stable and long term source of efficient Capital.
“This market environment creates an ideal space for an innovative organisation like Howden to develop new reinsurance products and structures, leveraging available capacity to benefit both clients and the industry – which is positioned for all participants to thrive. Over the next 12 months, we look forward to continuing our success in adding value for clients through an increasingly heightened macro risk landscape.”
David Flandro, Head of Industry Analysis and Strategic Advisory, Howden Re, added, “The transition from peak pricing continues to offer fertile ground for those able to leverage data, analytics and innovation. Market trends are unfolding in an environment of buoyant reinsurance capital set against a growing spectrum of risk, amidst a backdrop of increasing macroeconomic and geopolitical uncertainty. These interconnected dynamics underscore the critical importance of understanding the full breadth of market cycles and capital flows. At Howden Re, we are uniquely positioned to provide the insights and strategies our clients need to navigate this complexity, ensuring resilience and success throughout the cycle.”
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Property cat pricing declines 8%, retrocession falls 13.5% at January renewal: Howden was published by: www.Artemis.bm
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