New capacity greases renewals; Guy Carpenter RoL index still up 35% YTD

Fresh doses of reinsurer capacity arrived to help ease the pressure of mid-year renewals, but without taking much momentum out of the ongoing run up in rates, now up 35% year-to-date in US property, according to an early read on the  Guy Carpenter rate-on-line index.

“Additional capacity and increased appetite entered the property market at mid-year,” Guy Carpenter analysts said in the kick-off to their review of property treaty, the hottest segment of the mid-year treaty renewals.

But fresh capacity is a far cry from a derailed hard market, especially as demand growth continues apace.

Reinsurers “remained highly disciplined around attachment points, pricing and coverage,” leading to strong double-digit pricing gains and a “wide range of risk-adjusted rate changes seen throughout individual layers.”

Global property catastrophe risk-adjusted rate increases ranged from +10% to +50%, often higher for loss-impacted accounts. In the US, property catastrophe reinsurance risk-adjusted rate increases ranged from +20% to +50%, considered a 17-year high on average.

Guy Carpenter’s preliminary read on its US property catastrophe rate on line index, a measure adjusted for treaty structures and current views of risk on actual dollars paid, has now increased 35% YTD for the January through July renewals.

“Price adequacy across lines and supportable structures are expected to continue to drive sufficient capacity levels,” Guy Carpenter CEO Dean Klisura (pictured) said.

Cedents accommodated the hard market as before in 2023, acquiescing to higher retentions and resigning from some lower layers rather than paying through the nose. “For cedents, higher levels of retained risk across the business in 2023 will most likely impact volatility in 2024, necessitating strategic portfolio management,” Klisura noted.

Retrocession told a similar story. Mid-year renewals brought “a continuation of price and coverage trends experienced earlier in the year,” just in a more orderly process with quotes falling into a narrower, more manageable, range.

Outside of property, casualty reinsurance renewals “continued to trend in a cautious direction” with pricing pressure holding on account of prior-year loss development, social and economic inflation, moderating underlying rate changes and an increase in reinsurer margin requirements, Guy Carpenter said.

Cyber enjoyed an increase in capacity for the quota share deals the segment relies on, often purchased in conjunction with aggregate coverage. Reinsurer appetite appears to have followed the gains in underlying rate and loss performance. Aggregate capacity, pricing and terms were said to have remained stable at mid-year.

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