What to expect in the 2024 1/1 US property reinsurance renewals
Gallagher Re SVP shares tips for making the most of a ‘moderating’ market
Reinsurers will focus on deploying their capital in excess layers while shying away from aggregate covers of catastrophe risk in the wake of a challenging convective storm season.
That’s according to a Gallagher Re regional market survey ahead of the upcoming 1/1 renewals in 2024.
“Reinsurers are a little more selective about how they’re deploying their capital this year. Rather than providing aggregate covers for cat risk, they want to do it through different programs,” said Greg Moore (pictured), senior vice president and US Midwest property product leader at Gallagher Re.
“The aggregate market is difficult, especially for anything new. There will be a lot of capacity for XOL (excess of loss) towers, especially at the top. But the bottom of programs remains difficult given recent loss activity from severe convective storms.”
What does Gallagher Re’s survey on the US regional property reinsurance market reveal?
Ahead of 1/1 renewals in 2024, Gallagher Re surveyed 24 reinsurers active in the regional market and focused on regional personal and small commercial businesses.
The reinsurers were polled on pricing and portfolio appetite, capacity expectations, and structure considerations for various reinsurance programs.
It found the overall dollar amount of capacity to be deployed in property catastrophe coverage was likely to remain flat.
Over half (58%) of reinsurers planned to write the same amount of property exposure as last year through similar levels of participation in insurers’ cat programs, with 38% planning for modest growth.
Gallagher Re also found that reinsurers are twice as likely to deploy property cat capacity in excess layers than aggregates this year. Nearly two in three (63%) are unwilling to write aggregate covers, compared to 37% in 2022.
“We’re finding there’s more activity from non-traditional players, whether it’s parametric or non-indemnity triggers, to help fill in where a traditional aggregate cover once played,” Moore noted.
In terms of price increases, Gallagher Re’s survey highlighted the following:
- For property cat XOL portfolios impacted by losses: 68% of reinsurers surveyed expected a price increase between 10% to 30%.
- For loss-free property cat XOL: 84% of reinsurers expected price increases below 20%, with 46% indicating less than 10% increases.
- Loss-free accounts for per-risk coverage were expected to generate rate increases of flat to 10%, according to 49% of respondents, up from 27% of reinsurers in 2022.
Overall, Moore told Insurance Business that the market is moderating compared to the January 2023 reinsurance renewals, which were widely deemed the most challenging in a generation.
Insurers faced steep rate rises between 45% and 100% during the 1/1 2023 renewals, as reinsurers made significant adjustments to pricing and risk appetite, especially for property catastrophe risk. The increases were primarily driven by costs from Hurricane Ian in Florida in 2022.
“There is capacity available for the right price and structure,” Moore said. “Reinsurers continue to differentiate significantly between clients based on loss experience.”
Making the most of the 1/1 reinsurance renewals
Gallagher Re’s survey points to a key trend among reinsurers, according to Moore: that they are leaning into the market in a “meaningful but selective way.”
Reinsurers’ desire to shift capacity further up the programs to more remote layers will result in ample capacity at these levels, which could reduce pressure on rates, according to Gallagher Re.
“Reinsurers are willing to find to have a dialogue around solutions that could provide some type of sideways cover, not a full-on aggregate treaty, but things like subsequent event dropdowns to at least give a backstop of multiple severe events in a given year,” Moore said.
“It’s a midway point between simply raising a retention and having every cover that covers every accumulation of every small event.”
Moore also shared how Gallagher Re is tackling the upcoming 1/1 renewals.
“The best defense against increased costs and retentions is having pricing and underwriting risk selection in order on the front end, which is a huge opportunity for brokers,” he said.
“Gallagher Re is developing and deploying tools at scale to help our clients be profitable on a gross basis. That does two things: it helps carriers organically protect and grow surplus, and it helps clients tell a better story and differentiate themselves in a crowded reinsurance market, where, while there is capacity, reinsurers are being selective about where and for what price they deploy it.”
What are your expectations for the 1/1 reinsurance renewals for the US regional property market? Share your thoughts below.
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