Property reinsurance buyers see lower rates

Property reinsurance rates moderated or fell during mid-year renewals, but reinsurers remain concerned about liability exposures, according to the reports issued by the world’s three largest reinsurance brokerages Monday.

July 1 property catastrophe reinsurance renewals remained orderly after manageable April 1 and June 1 renewals for cedents without losses, and loss-hit insurers saw less favorable rates that were tied to their specific loss histories, the brokerages said.

Risk-adjusted rates for global property catastrophe reinsurance were generally flat to mid- to high-single digits decreases, according to a report by Guy Carpenter & Co. LLC, the reinsurance brokerage unit of Marsh & McLennan Cos. Inc.

Aon PLC reported that U.S. insurers saw risk-adjusted price reductions ranging from mid-single digits to low-double digits in property catastrophe markets.

Gallagher Re, the reinsurance brokerage of Arthur J. Gallagher & Co., said risk-adjusted catastrophe placements were flat to down 10% on an overall program basis as “reinsurers were more willing to adjust premium than structure.”

Increases ranged from 5% to 15% for catastrophe-exposed accounts in the U.S. with losses. Loss-hit accounts in Latin America and the Middle East saw increases into the mid-double digits and as high as 60%, the report said.

Liability reinsurance markets were less settled as loss reserve development and claims frequency and severity were scrutinized.

“We are definitely seeing continued scrutiny on the casualty business,” said Lara Mowery, New York-based global head of distribution at Guy Carpenter.

Aon put casualty renewals at “generally flat to single-digit increases on a risk-adjusted basis” but noted that “the frequency of severity losses and U.S. social inflation … is now a central focus of renewal discussions.” Liability insurers and reinsurers have said for several years that court awards and settlements are increasing at rates beyond economic inflation.

U.S. general third-party liability excess of loss rates rose 5% to 10% with no loss emergence and 5% to 15% with loss emergence, according Gallagher Re, which said “reinsurers continued to put pressure on pricing,” as U.S. casualty loss trends “remain elevated.”

General liability and excess/umbrella placements with U.S. exposure “experienced continued reinsurance pricing pressure for excess of loss programs,” Guy Carpenter said.

“A number of people were quite unnerved by the reserve strengthening in the fourth quarter that some of the large U.S. carriers undertook,” said James Vickers, London-based chairman international, reinsurance, at Gallagher Re, a unit of Arthur J. Gallagher & Co.

Meanwhile, the insurance-linked securities market saw robust first-half issuance. With more than $11 billion of new issuance brought to market, the sector is well on its way to shattering the $15.4 record of new issuance in 2023.

Due to differences in the way deals are counted, Gallagher Re pegged first-half issuance at $11.2 billion, while Guy Carpenter put the total at $11.9 billion.

The second-quarter issuance of $8 billion of catastrophe bonds was also a record for a single quarter, according to Aon.

“Cat bonds may be a smaller portion of total catastrophe limit placed, but they have been an important component of that capacity, and they’ve been a growing component of that capacity,” Ms. Mowery said.