Reinsurer extreme event PML growth slows in ’24; focus on wind: Moody’s
Reinsurer ultra-low occurrence PML tail appetite slowed into 2024 across five key global nat cat perils, and finally slipped as a percentage of reinsurer equity, but with stand-out growth by Munich Re supporting PML growth in the key stalwart growth perils of US and European wind.
Reinsurer PMLs in the highest return periods across US, Japan and European wind and US and Japan earthquake have risen 5.5% CAGR since the 2018 start to the hard market, analysts at Moody's have calculated.
But annual growth fell to 1.8% annual after the 1.1.2024 renewals, slow enough to deliver an overall de-risking when measured against adjusted equity, the first reduction in high-return period PML to equity since the market hardening began.
Lingering appetite has been focused on US and European wind.
For European wind, weighted average sector 1-in-250 PML has risen as a portion of equity throughout the hardening, even accelerating from 2022 onward. Nominal PMLs rose 18.5% for the 2024 measure alone, a big of catch-up after European cedants fell behind in coverage during the 2023 market reset.
US wind has the highest low-occurrence PML to equity ratio among perils and, as a percentage of equity, is the second strongest growth story going. Growth held through 2023 before a light tail-off in 2024.
Other perils have tapered off when measured against equity since equity levels started recovering beginning in 2023.
Where there has been PML growth vs equity, there has been Munich Re in the lead.
“Given the strong pricing for property catastrophe risk, a number of companies have significantly increased their PMLs over the past several years on both a nominal basis and as a percentage of equity capital,” Moody's analysts said, citing Munich Re, Everest and Arch Capital.
Munich Re extreme event PML to equity has risen from below 20% of equity in 2019 to nearly 35% in 2024, Moody's data indicates.
Compare neighbourhood 5 percentage points (pps) gain for Everest, neighbourhood 3 pps for Arch, both against much lower PML readings. Note Lancashire in the Moody's select dataset as the second biggest risk-taker in US wind behind Munich Re, several points above its mid-term median level.
Equally in European wind, albeit with more peers joining Munich Re in the increase in PML as a portion of equity. Munich Re increased ultra-cat PMLs by some 7-8 pps to become leader amongst studied peers in 2024, more than twice the levels at Swiss Re and Hannover Re, both also up incrementally.
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