Property insurers to shift more reinsurance costs to clients, warns WTW

Challenged reinsurance renewals will push through to continued higher rates and tougher terms in the property insurance market, including 25 to 40% rate gain for challenged properties and some 10-20% for the remainder, analysts at global broker  WTW have claimed.

Cat risk aversion and inflation concerns will add pressure, with a risk that cat capacity could run short by the second half.

“Every insured will see continued pressure at renewal on rates, values and terms,” authors said of property market conditions.

“With a prolonged reinsurance treaty season, insurers will further exacerbate the already hard market conditions.”

The mass of heavy double-digit hikes to both rate and retention at the 1/1 treaty renewals left primary market insurers scrambling to rejig 2023 plans and craft means of shifting thumbscrews onto the insureds.

That led to a “significant” delay in Q1 primary property renewals and will have a “similar effect” on quoting in Q2. That delay will be compounded by the heavy flow of submissions as end-clients are forced to play with numerous options to handle the hard market.

The result is less work on new business and more work on optimising existing portfolios. That means trimming exposures to loss-makers, the heavily cat-exposed.

“The ongoing expectation for 2023 is for a continued reduction in capacity in high hazard Nat-Cat zones,” authors wrote.

It’s the usual cat suspects front row on the elimination list. Florida wind and California earthquake “are posed to be hit the hardest.”

“There is a concern, with limited aggregate available, that capacity for catastrophe risks may be fully deployed by midyear resulting in a shortage for Q3/4.”

Coverage is becoming “narrower” even where it isn’t already overly scarce, a tightening being kicked down the line from reinsurers on top.

That puts deductibles in focus and adds exclusions, WTW wrote.

Work may also be done on deductibles as secondary perils become a focal point amid heavy doses of freezing temperatures, historic rain and severe convective storms (SCS) run from Q4 2022 and into Q1 2023.

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