Growth could be challenged when current pricing momentum starts to moderate: Thompson, Gallagher Re

Growth was a key topic for re/insurers at RVS 2024, Will Thompson, Global Head of Clients of Gallagher Re, commented, but this could be challenged when the current strong pricing momentum begins to moderate.

Speaking with Reinsurance News at the annual meeting of the reinsurance industry in Monte Carlo, Thompson said: “Many of our global clients have been reporting respectable growth of six, seven percent over 2023 in the first half of 2024. But when we look at that growth, most of it is coming from rate pricing, and volume has been somewhat subdued.

“Although many of the insurance lines are well priced at the moment, when the current strong pricing momentum inevitably begins to moderate, that will present a growth challenge for some of our clients.”

He continued: “Then, if you overlay on top of that the fact that the insurers generally are very well capitalised at present; if we look, for example, at the larger European insurers, their capital ratios have started to stabilise in the first half of 2024, but they are at about 20 percentage points higher than the upper end of their solvency targets.

“That means that they’ve got to consider how to profitably deploy that capital. Therefore, I think when we look at those two factors you could ask whether some clients may think that maybe they need to reduce the reinsurance that they sort of look to purchase to sort of increase that net premium. But because that would result in heightened volatility, we’re not expecting to see any reduction in session rates.”

Talking about the January 2025 reinsurance renewals, Thompson believes insurers will be looking for improved value as it is unlikely they will want to reduce their cession rates.

“I think the very significant repricing of risk, and the now very high levels of profitability that reinsurers are enjoying, is very well documented. But when we look at the forthcoming renewal I think clients are unlikely to want to reduce their session rates but they will want to see improved value,” he said.

“And reinsurers are wanting to grow, whilst maintaining discipline,” Thompson continued. “So, the owners will be on us to help find innovative ways for clients to improve structures, terms & conditions that meet their reinsure a risk appetite. One example is the debate around earnings and volatility protections on the property cat side.

“Of course, we’ll play an active part in those discussions in terms of attachment levels, aggregate excels, but I think that what we’ll also be looking at is developing our proposition in areas like structured reassurance and parametric solutions. Two areas where over the last 12 months, we’ve had a lot of success in helping clients with that earnings and volatility topic.”

Like all the other renewal seasons, next year’s will also have its challenges, which cannot be underestimated, Thompson also noted, and highlighted the importance of differentiation.

He concluded: “We know that this topic of equitable sharing of cat risk is a delicate one. And reinsurers fought very hard to increase attachment levels over recent renewals and they’re not going to give those gains up easily. Our track record over the last 12 months shows that there are reinsurers willing to engage and come up with ways of addressing client needs.

“We aim to share our clients’ perspectives on risk, claims, and reserving trends, as well as their growth and remediation strategies. While we acknowledge that there may be challenges in certain market segments that will require difficult discussions at 1.1, it is important to note that not all clients perform the same way or approach these challenges in the same manner.

“By emphasising differentiation, we believe we can ultimately achieve the best possible outcome for our clients.”

This website states: The content on this site is sourced from the internet. If there is any infringement, please contact us and we will handle it promptly.