As 2024 unfolds, the global reinsurance marketplace is relatively stable following a year of "extraordinary cyclical and structural change," according to a recent renewal report from the global reinsurance group Howden. The firm has dubbed this period, "The Great Realignment." Tim Ronda, CEO of the strategic risk advisory Howden Tiger, noted the reinsurance market stability in recent comments about the report. "Reinsurers were relatively unscathed by large losses in 2023, due in part to more favorable terms and conditions, including higher risk retentions and attachment points," Ronda said in a prepared statement. "Returns are back at equal to, or greater than, reinsurers' cost of capital. Activity in the lead-up to 1 January was timely and orderly, and our clients are in a better position to understand their cost of reinsurance and volatility within their retention. It seems we are in a period where stability is rewarding both clients and reinsurers." Over the past year, fewer major losses and increased capital helped produce the current favorable conditions as opposed to a year ago, when investor fatigue resulted in "trapped capital." Here are some of the other top-line takeaways from Howden's report:
  • U.S. reinsurance renewals as of Jan. 1, 2024 reflected improved supply dynamics, with reinsures willing to support terms and pricing levels broadly aligned to those established during last year's renewals.
  • Although capacity continued to be restricted for lower layers, increased competition generally brought more attractive pricing for mid-to-top layer risks.
  • Risk-adjusted pricing remained stable as a result, however regional carriers exposed to severe convective storm losses have seen substantial increases.
Any pricing nuances surfacing in the reinsurance market "reflect new macroeconomic and geopolitical realities and re-set loss expectations," Howden reported. David Flandro, Head of Industry Analysis and Strategic Advisory, Howden Tiger, added: "Dedicated reinsurance capital has recovered to near record levels. Generationally strong pricing, favorable terms and conditions in key lines of business and pursuant, higher returns on capital have enticed capacity back into the market through multiple channels. This, combined with a rapid recovery in traditional balance sheets has meant there was excess capacity for some placements. The structure of the reinsurance market continues to change, with alternative capital now comprising nearly a quarter of the total." Looking specifically at the global property insurance market, risk-adjusted reinsurance rates rose an average of 3% as of Jan. 1, 2024, down considerably from the 37% increase experienced a year ago. In the casualty space, sufficient capacity and market discipline characterized reinsurance renewals, Howden reports. These trends signal optimism for 2024 with observers expecting inflation to coalesce and financial markets to rally. That doesn't mean the horizon is without challenges thanks to modest economic growth, inflation volatility, climate change, civil unrest and war. "Risks are escalating as the world lurches from one crisis to another," noted Howden CEO and Founder David Howden." The value of risk transfer comes to the fore during such volatile times. This is the moment for brokers and carriers to step up and apply our intellectual and financial capital to find creative solutions that safeguard the insurability of assets exposed to a myriad of risks, including climate change, geopolitical instability and rapid technological advancements. Offering innovative products that meet clients' changing needs is the route to long-term relevance, and new possibilities." See also:
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