Property Catastrophe Reinsurance Pricing Moderate – Report | Insurance business America
Tariff increases will follow in 2022 and 2023
reinsurance
By Abigail Adriatico
Howden Re has reported a moderation in pricing in the property catastrophe reinsurance market following rate increases in 2022 and 2023.
Average risk-adjusted online property catastrophe reinsurance rates were 5% lower than usual – typically between -7.5% and -2.5%, it said.
According to the report, the reinsurance market is in a period of adjustment, driven in part by the revival of dedicated sector capital exceeding 2021 levels, as well as strong ILS inflows. This led to an increase in capacity at the top of the programs, which resulted in risk-adjusted rate reductions at the higher tiers.
“It is critical that our customers ensure optimal coverage in this rapidly evolving landscape. “This means not only finding capacity, but also ensuring it aligns with their risk profiles and financial objectives,” said Wade Gulbransen, head of North America at Howden Re.
“Our focus remains on innovative thinking and dynamic placement strategies to meet these challenges head on,” he added.
The report noted an increase in activity and competition in the ILS market. As larger airlines in Florida have been more active in issuing catastrophe bonds, supply at higher tiers has increased, leading to significant growth in assets under management by financiers.
Following strong performance in 2023, some reinsurers shifted their focus to real estate risk as several reinsurers reported some of the best financial results in decades in terms of combined ratio, return on equity and economic value, added.
This surge in ILS interest reflected a trend in the broader market when it comes to diversified alternative risk transfer mechanisms, which gave reinsurers and cedants more options in managing their risks.
However, factors such as the 2024 hurricane season may place short-term valuation pressure on the market as weakening El Niño and the increased likelihood of La Niña occurrence may result in stronger storms, highlighting inherent market volatility as well as the need for more strategic resilience.
“The reinsurance market is at a critical point. While the recovery in dedicated capital and increased capacity point to a possible moderation in interest rates, the forecast active hurricane season and other market pressures could counteract these trends. Strategic adaptability and expert advice are essential to managing these dynamics,” said David Flandro, head of industry and strategic advice at Howden Re.
Howden Re is the reinsurance and strategic advisory arm of Howden.
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2024-05-31 13:30:00
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