Reinsurer discipline continues in latest renewals

The run-up to the July 1 reinsurance renewals reflected the pricing and structural dynamics that were observed during the Jan. 1 renewal period, according to the latest 1st View renewals report from Gallagher Re.

The mid-year placements caught up with prevailing market trends, resulting in a relatively orderly and rational renewal process, with sufficient capacity available to meet client needs, the report found.

While there were significant year-on-year price increases, the market remained stable and stress-free in most cases.

Reinsurers aimed to align terms and conditions with those seen in previous renewals, and the entry of new capital, both traditional and insurance-linked securities, coupled with moderated demand and improved expectation management, contributed to a more organised renewal, Gallagher Re said.

Key findings from the report include:

• The casualty treaty market experienced straightforward renewals, with adequate capacity and flat to moderate rate increases. Reinsurers were comfortable with underlying portfolios, leading to stable market conditions.
• Insurance-linked securities (ILS) funds achieved strong returns in 2023, attracting investor interest and resulting in an increase in the issuance of bonds. ILS attention shifted from traditional property perils to other opportunities like cyber and casualty, as the property market moved toward balance.
• There were limited signs of new reinsurance entities forming, indicating a trend of consolidation into larger entities. This consolidation, combined with the absence of major losses, suggests pricing stability in the market.

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“With the improved terms and conditions available in the reinsurance market, some existing reinsurers are leaning into the hardening market, committing more of their existing capital, as well as any new capital they are raising, to reinsurance,” said Tom Wakefield, global CEO of Gallagher Re. “However, in contrast to other historic hard markets, there are limited signs of completely new reinsurance entities forming and the current trend is one of consolidation into fewer, larger reinsurance entities – which, in the absence of any major losses, points towards pricing stability.”

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