1.1 renewal pricing likely hit or beat reinsurer dreams

The January 1, 2023 reinsurance renewals likely met or beat expectations of leading global reinsurers, equity market analysts said in chorus following early signals on the prices and terms secured to 1.1.

Reinsurance renewal risk-adjusted pricing appears “at least in line with, if not above, already very high expectations,” analysts at the Berenberg brokerage said in a morning note to clients following review of key insurance brokerage reports from the renewal.

“The market has made significant strides to improve profitability, particularly in underperforming property nat-cat business,” Berenberg said of what they called a “very strong” result to the renewals.

Wells Fargo echoes the sentiment, calling results “in line” with reinsurer expectation and enough to ‘clearly show that the market has turned.”

Pricing movement took accolades, with Jeffries declaring a “new all-time high” achieved on the single-strongest annual gain since 1992 with alarming gains in retrocession costs forcing the broad reinsurance pricing move.

Citing the 37% risk-adjusted global property catastrophe price increase and 50% retrocession spike cited by the Howden insurance broker, Jeffries sees retro rates now up 165% from their mid-2017 cyclical lows to fore what it believes is now the all-time high in reinsurance pricing.

“Moreover, these price rises have been relatively broad based,” Jeffries notes with satisfaction, citing European property reinsurance prices up +30% versus a 50% average gain in the US. “This is a refreshing change of pace, as the last five years of price rises have seen material regional disparities.”

The question for 2023 remains as it was for 2022: how long before the hard market draws in the fresh capacity that will eventually temper the price action.

“We would not be surprised to see more capital being raised and deployed through 2023,” Berenberg said of a market environment it called “undoubtedly the best seen in decades.”

While fresh capital accumulates, Berenberg likes the strongest balance sheets ready to capitalise on current pricing opportunities.

“Although a rising tide will lift all boats, we think the reinsurers entering 2023 from a position of strength and with the greatest appetite to increase their net exposures at this point in the cycle are likely to benefit the most in the medium term.”

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