Hard reinsurance market not drawing game-changing capacity near-term

The hard reinsurance market has yet to signal any ability to scare up the kind of new capital that might weaken or alter the market’s upward trajectory, top officials from leading Bermuda reinsurance firms told an investor soirée on the island.

“None of our conversations left us with the impression that a flood of capital is around the corner waiting to soften pricing for US reinsurers, especially in property cat,” equity analysts from Wells Fargo said in a note to markets following a tour of the island.

Chatter is audible suggesting one to two new rated balance sheets are in formation, analysts wrote following talks, but such stories were being told last year without effect and the potential sums in play this year don’t sound game changing.

Asked how much new capital would be required for concerns to rise about pricing, officials at Everest Group (formerly Everest Re) said a figure would have to be in the "tens of billions" of dollars and Wells Fargo analysts seem to concur.

Nor is the pending purchase of Validus Re by RenaissanceRe a game changer for the market trajectory. No new capital capacity equals no change in pricing drivers.

Cat bonds are the one element of the supply mix showing growth potential, but not enough to alter the market, Wells Fargo says after talks among industry players. “Our sense is reinsurers will continue to hold the line and not push pricing back to the levels seen prior 2023.”

That only leaves a potential reversal on US catastrophe appetite from a major European reinsurer among serious risks from the supply side. But analysts at Wells Fargo “don’t expect it to play out” that way.

While that gives the market legs through mid-year and beyond, the bottom line for 1/1/24 remains unclear. Authors cite “a general lack of consensus on the direction of rates.” Brokers sound bullish, underwriters a bit less so and rate bears were also to be found on the island. Everest said that flat rates at 1/1/24 would be “terrific.”

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