Executive Summary:
The 1.1.24 renewal season has seen major changes in market conditions compared to last year. Only 12 months ago property catastrophe reinsurance was considered an unpredictable and volatile class warranting reduced capacity and changes in coverage, attachment, and pricing. Capacity was mostly appetite constrained rather than capital constrained, with shortages of supply limited to a few areas of peak exposure.
- Property supply and demand has snapped back into balance, with returns for the first three quarters of 2023 exceeding reinsurers' increased cost of capital. Retained earnings, modest new capital raises, ample retrocession capacity and buoyant ILS markets combined to increase available catastrophe reinsurance limit.
- Casualty, notably but not exclusively US casualty, was no longer the valuable currency that was used to support property catastrophe capacity this time last year. Confidence in third party liability lines has diminished despite very significant increases in primary market pricing and limit reductions since H2 2019.
- In line with recent years, capacity for specialty lines remained buoyant, with coverage, not pricing being the main challenge.
2024 looks to have provided a welcome return to more stability and predictability, allowing the expectations of all parties to be managed in a less rancorous fashion than 12 months ago. More relevant are the signs of over-placement on well-structured programs, indicating an improving position for some buyers going into 2024. From a pricing and structure perspective, reinsurers managed to hold their positions, but perhaps not always their shares, and some buyers remain dissatisfied about the lack of available capacity for earnings protections.
