Gallagher Re, one of the leading global reinsurance brokerage firms, has reported that as of January 1st, 2024, reinsurance renewals, U.S property catastrophe incidents increased by as much as 50% for loss-hit business, primarily driven by record severe convective storm (SCS) activity.
In its just released ‘1st View Report’, which discusses an overall more stable and predictable Jan 1st renewals when compared with last year, the firm disclosed that reinsurance rate increases moderated when compared with 1.1 2023, although for loss-hit U.S. business, price rises were still fairly significant after a record year for SCS activity, with losses from peril reaching an all-time high of around USD60 billion.
As a result of the research findings, Gallagher Re stated that loss-hit cat programmes in the U.S. experienced further pressure on retentions, rates, and narrower reinsurer quoting panels.
A news report from Reinsurance News, an industry-focused online medium, on the report’s findings indicated that in 2023, primary insurers retained a much greater share of losses from the SCS peril as reinsurers moved away from frequency events, and Gallagher Re’s 1.1 2024 commentary points to a continuation of this trend.
The reinsurance broker noted that reinsurers adjusted their view of SCS frequency to account for the active 2023 storm season, which put additional pressure on pricing.
The news report disclosed that at 1.1 2024, lower attaching cat layers experienced the greatest pressure on rates, while mid to upper layers benefited from ample supply. Further, loss-hit risk programmes experienced varying levels of pressure on retentions and also a shift from prepaid to paid reinstatements, says Gallagher Re.
In terms of rate movements, Gallagher Re further hinted that U.S. risk loss-hit programmes saw rate increases of between +7% to +50%, while catastrophe loss-hit programmes saw increases of between +10% to +50%. For both risk loss-free and catastrophe loss-free programmes rates were flat to up 10%, reports the broker.
Gallagher Re further clarified: “Overall, there was an adequate supply of catastrophe and risk capacity and in some cases capacity outpaced demand. But there was greater reinsurer price sensitivity on loss-impacted programs.”
While for loss-hit business pressure on rates persisted for primary insurers, the broker’s report reflected that the market dislocation experienced during 1.1 2023 had subsided.
The firm reported: “Reinsurers had clearly defined plans in place for renewal business, which allowed for an orderly quoting process.
“Reinsurers returned to a more bespoke, client-specific underwriting approach, heavily influenced by company performance and strategies related to rate, insurance to value, deductibles and other cost sharing initiatives”, Gallagher Re added.
