1 January 2024 reinsurance renewals ‘relatively stable’ as market conditions improve

The 1 January 2024 reinsurance renewals were “relatively stable and orderly” following an improvement in market conditions.

That was according to Howden, which said in a statement released today (2 January 2024) that renewals took place in an environment of more favourable supply dynamics.

The broker highlighted that stable renewals were yielded due to the absence of major losses in 2023 and increased capital inflows towards the end of last year.

Tim Ronda, chief executive of Howden Tiger, said: “The reinsurance market has stabilised after last year’s exceptionally challenging renewal.

“Reinsurers were relatively unscathed by large losses in 2023, due in part to more favourable terms and conditions, including higher risk retentions and attachment points.

“Returns are back at equal to, or greater than, reinsurers’ cost of capital.”

Markets

This came after a particularly gruelling January renewal season in 2023 following geopolitical and macroeconomic headwinds in 2022, such as Hurricane Ian and interest rate hikes across the globe.

Howden said that while last year’s dislocated renewal reflected trapped capital and long-standing investor fatigue, improved performance in 2023 put “pressure on price and signings”.

For example, it revealed that more favourable supply dynamics helped to moderate overall pricing increases from low to mid-single-digits in the European property-catastrophe renewals.

London market casualty reinsurance excess-of-loss rates also remained stable at 1 January 2024, while the D&F reinsurance market was supported by clients renewing programmes following a year of growth and favourable loss experience.

And Howden highlighted that “strong” investor appetite saw catastrophe bond pricing fall in the 10% range and “remain at attractive levels for both buyers and sellers”.

David Flandro, head of industry analysis and strategic advisory at Howden Tiger, said: “Dedicated reinsurance capital has recovered to near record levels. Generationally strong pricing, favourable terms and conditions in key lines of business and pursuant, higher returns on capital have enticed capacity back into the market through multiple channels.

“This, combined with a rapid recovery in traditional balance sheets, has meant there was excess capacity for some placements. The structure of the reinsurance market continues to change, with alternative capital now comprising nearly a quarter of the total.”

Headwinds

While Howden said that 2023 “ended on a strong note from a macroeconomic perspective”, it felt that headwinds were likely to persist in 2024.

It highlighted that inflation volatility, climate change, the net zero transition, civil unrest and war could “be more difficult to predict”.

However, the broker is expecting modest economic growth across advanced economies.

David Howden, founder and chief executive of Howden, said: “Risks are escalating as the world lurches from one crisis to another. The value of risk transfer comes to the fore during such volatile times.

“This is the moment for brokers and carriers to step up and apply our intellectual and financial capital to find creative solutions that safeguard the insurability of assets exposed to a myriad of risks, including climate change, geopolitical instability and rapid technological advancements.

“Offering innovative products that meet clients’ changing needs is the route to long-term relevance and new possibilities.”