In the lead-up to the July 1 reinsurance renewals, both the pricing and structural market dynamics that defined the Jan. 1, 2023 renewal period held steady, said Gallagher Re’s most recent 1st View renewals report.
During the July 1 renewals, mid-year placements caught up and aligned with prevailing market undercurrents, it said.
“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, Gallagher Re’s Global CEO.
While year-over-year basis increases were significant, the reinsurance market “was orderly and rational with adequate capacity from the reinsurance market available to support client needs. This resulted in a less-stressed renewal process in most cases,” the company said.
The renewal period also saw moderated demand due to “increased retentions and limited purchases of additional limit and clearer expectation management by all parties,” the report said.
New capital entered the market from both traditional sources and insurance-linked securities (ILS), an emerging class of securities that have their values linked to insurance loss events.
“One of the more encouraging signs has been the ability of some ILS funds to attract new investments, particularly into more liquid Cat bond strategies,” said the report. “Attention has begun to refocus on ILS for other perils, structures and opportunities, including cyber and casualty, as the property market comes more into alignment.”
The report also observed some consolidation among reinsurers.
“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,” Wakefield added.
During Canada’s Jan. 2023 renewal cycle, pricing caught most people’s attention while the terms and conditions were restricted – contributing to why Canada’s primary insurers were retaining more risk for high-frequency secondary perils.
“Over the last number of years, there’s been some general upwards pressure on Cat excess-of-loss retentions,” Peter Askew, president and CEO of Canada at Guy Carpenter & Company Ltd., said during a panel at the Insurance Institute of Canada’s Symposium in Toronto.
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