P&C rates should still rise but any hardening will be more pronounced in casualty, say respondents to a Monte Carlo Today survey

“The reinsurance market is walking a tightrope: balancing rising claims frequency, inflation and the need for sustainable growth while avoiding drastic shifts in rates or terms,” said one respondent to Monte Carlo Today’s pre-renewals season survey 2024.

As Monte Carlo gets underway, key concerns for re/insurance leaders who took the survey focus on property and casualty rates, terms and conditions, and new business opportunities.

These responses highlight the industry’s challenge in maintaining profitability while managing inflation, market capacity, and evolving risks.

Moderation expected

On property reinsurance rates, most respondents expect increases, although opinions differed on the scale, with some 49 percent of respondents expecting rate increases of some description but 38 percent anticipating rate adjustments in line with inflation.

Only 16 percent supported significant hikes above inflation, suggesting a general consensus for market stability and an element of equilibrium with no extreme shift anticipated.

“Rates should be parallel, or in line, with inflation.”

But this trend also reflects concerns about rising inflation. One respondent commented: “Rates should be parallel, or in line, with inflation, unless there is a dramatic, geographically large property loss.”

Another backed this up: “The issue of water damage will have an impact, but maybe not for this campaign”, and while risks such as climate change are a concern, reinsurers do not yet foresee the need for drastic rate adjustments.

At the same time, losses from secondary perils were mentioned as a driver for rate increases.

As one participant explained: “We need reinsurance rate adequacy due to claims frequency increasing.”

With losses becoming more frequent, reinsurers are focused on ensuring their rates remain sustainable.

When considering property reinsurance terms and conditions (T&Cs), 27 percent of respondents favoured maintaining the status quo, while some 51 percent anticipated small, incremental tightening, reflecting the considerable hardening of terms in recent cycles, with little appetite for further restrictions.

One respondent stated: “After considerable tightening of coverage and increases in attachment points, the terms should remain flat this year.”

The consensus appears to be that maintaining stable terms will ensure that reinsurers and cedants can navigate the upcoming renewals season without additional stress on profitability.

“Casualty lines are broader, and some may need modest increases while others could soften.”

Casualty a greater challenge

The outlook for casualty reinsurance rates is more divided. While 24 percent of respondents called for moderate increases, 35 percent supported significant hikes above inflation, and 30 percent felt rates should rise in line with inflation, suggesting the casualty market is seen as more volatile than property, with varying pressures depending on specific lines.

One respondent noted: “Casualty lines are broader, and some may need modest increases while others could soften.”

This diversity within casualty lines explains the differences in opinion about rate changes.

In terms of casualty reinsurance terms and conditions, 28 percent of respondents advocated robust tightening, with 38 percent calling for minor tightening.

One respondent wrote: “Contracts which have experienced adverse loss development in the past 12 months will show greater tightening of terms.”

There appears to be a preference for cautious adjustments, reflecting the complexity of the casualty market.

For more news from the Rendez-Vous de Septembre (RVS) click here.

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