Reinsurance hard market ‘undiminished’ at 1/4; property cat still racing

Reinsurance renewals at 1/4 brought rate hikes of up to 50% in the Japanese property market and up to twice that in the US in what proved to be orderly renewals, albeit with “unexpected and profound” impacts for some on the periphery.

At a bird's eye, 1/4 brought "a continuation of the discipline shown by reinsurers at January 1 but with a greater determination that pricing and contract improvements are applied across all territories and to all business lines," Gallagher Re said in the early overview to the renewals.

The January renewals had been more selective when making demands of cedents versus the "more uniform and global approach" at 1/4, authors said.

Capital supply "remained constrained" on few new entrants and some players still licking mark-to-market wounds from 2022, although sides saw "sufficient capacity available at April 1 to meet clients' needs."

April 1 is not the true capacity test, given the focus on Japan with its own specific cat profile.

Japan enjoyed the comparatively "orderly" renewal process as sides walked in with congruent expectations, long-term relationships and improved primary underwriting results.

Cat supply for Japan remained "broadly balanced" with demand stable and capacity withdrawals lower than feared. New capacity was visible, but highly priced.

Mark Japan with 15 to 20% rate increases for non-cat loss-free accounts to 20-50% gains for loss hit non-cat. Loss-free cat accounts were up 15 to 25%.

Buyers were said to have managed by increasing co-participation and added "small increases" in attachment points.

Other markets were given to individual cases of last-minute structural changes and late pricing with an "unexpected and profound" impact on some players.

Those changes are seen "pushing primary companies back to re-examine their original underwriting strategies," authors wrote.

For the US, mark non-cat loss-free accounts up 20 to 40% and loss-hit cat accounts up 60 to 100%. Loss-free cat accounts saw rate increases of 30-50% and loss-hit of 50 to 100%, Gallagher Re reported.

Quota share and lower layers in excess of loss were considered challenging and buyers bent to bring reinsurers on board at acceptable costs. Top-layers suffered upward price pressures.

In casualty, Japan suffered notable rate hikes for the traditionally stable line of personal accident reinsurance, driven by Covid-19 loss history. Rates were up 25 to 75% for XoL contracts with no change in loss trends and 50-100% where trends had shown some deviation.

Outside personal accident, the rate trend was double digit, but more moderated as reinsurers sought casualty as a means of diversifying into more non-cat business.

Mark Japanese general third-party liability at 10-20% where loss trends appear stable, up to 30% for lines with evolving loss. Professional lines rose 10 to 20%.

The US general third party liability sector proved quite stable, with XoL rates up in the lower single digits where loss trends appeared stable and 5 to 15% in other cases.

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