Property reinsurance pricing set to ease

MONTE CARLO, Monaco — Reinsurance buyers will likely see a more competitive property reinsurance market during year-end renewals, but U.S. liability reinsurance renewals could be challenging for cedents, senior reinsurance executives say.

While global catastrophe losses are again on track to top $100 billion, higher retentions and sometimes significantly higher prices pushed through over the past couple of renewals have helped reinsurers post robust profits this year, they say.

Reinsurers, though, have voiced concerns over rising court awards and settlements in the United States and deteriorating liability loss trends.

They were speaking during the annual Rendez-Vous de Septembre meeting in Monte Carlo last month, which marks the traditional beginning of the year-end renewal season. Senior executives at global reinsurers and brokers meet in the tiny principality by the Mediterranean to discuss rating levels and other market trends.

“Clearly, in 2023, the reinsurance market saw the need to realign and recalibrate,” said David Priebe, New York-based chairman of Guy Carpenter & Co. LLC. “The structural changes needed to be addressed, which they were.”

Moving into 2025, retentions will remain at the levels they increased to last year, and the increased capacity that entered the market will add competition, he said.

“You should see price moderation start to be achieved, anywhere between 5% and 10%, depending on the geography and depending upon the cedent,” he said.

The price hikes of 2023 created a “new equilibrium” in the market, said Marcus Winter, CEO of Munich Re North America property/casualty.

“That equilibrium has not really changed on the property side,” he said.

Demand for catastrophe reinsurance capacity has increased due to inflation, concentration of risk and economic development, mainly in the United States but also elsewhere, Mr. Winter said.

Increased rates and higher retentions, which led to most of the more than $100 billion in 2024 catastrophe losses being retained by primary insurers, produced improved results for reinsurers, said James Vickers, London-based chairman of Gallagher Re International, a unit of Arthur J. Gallagher & Co.

At the upcoming reinsurance renewals, buyers may “want to push back,” he said.

“Buyers have looked at their reinsurance programs so far in 2024, they’ve looked at the cost of their reinsurance programs and are not entirely happy. They are wondering if they are getting the best value, and it is a combination of both premium (and) also attachment point,” Mr. Vickers said.

In addition, cedents may seek to recover some lower-level volatility protection, he said.

There is a “healthy” amount of capacity in the commercial property reinsurance market, said Sharry Tibbitt, Warren, New Jersey-based global head of property and deputy chief underwriting officer of Everest Group Ltd.’s reinsurance division.

“I don’t think there’s an overabundance. We’re not seeing new capacity flooding the market, but the reinsurance industry did absorb an additional 10% limit. It does feel like it’s adequate,” she said.

Everest is “realistic” about the property market, Ms. Tibbitt said.

“We have hit a high-water mark, probably last year,” she said. Given the insurance sector is on pace for another year of more than $100 billion in natural catastrophe losses, “we may still need to respond with rate, although I do not anticipate any rate increases like we’ve seen over the last couple of years.”

Retention levels will likely remain “stable,” Ms. Tibbitt said.

Pricing trends will take more time to determine, sources said.

“Monte Carlo is always a bit too early to decide,” with reinsurers talking up the market and cedents talking the market down, said Mohamed Kotb, London-based managing director of United Insurance Brokers Ltd.

“Because of the positive results of the reinsurers, there is an impression from the clients that this may translate into a bit of a less hard market in due course,” he said.

Liability

In several presentations during the Rendez-Vous, reinsurers said they were concerned with rising U.S. liability costs.

“We think U.S. casualty is going to be a segment where we see significant, difficult discussion,” said Thierry Léger, Paris-based CEO of Scor SE.

Mr. Léger cited a “lack of tort reform” and a “litigation industry” in the U.S. as driving up loss costs.

Munich Reinsurance Co. is prepared to walk away from some U.S. liability business, said Thomas Blunck, chair of the reinsurance committee of the reinsurer’s board of management.

“We have no problem to give up volume if the terms and conditions are insufficient,” he said.

Swiss Re Ltd.’s U.S liability combined ratio is “not a pretty number,” Gianfranco Lot, chief underwriting officer, property/casualty reinsurance, for the reinsurer, said without giving specific figures. “It wasn’t a profitable book.”

Swiss Re has an appetite for casualty business outside the U.S., Mr. Lot said, “but in the U.S., Swiss Re continues to be very cautious around this line of business.”

The reinsurer expects a contraction in U.S. liability business because median primary limits being purchased by commercial policyholders have dropped.

Cyber

Reinsurers continue to see growth opportunities in cyber reinsurance.

The cyber market is “going to grow significantly over the next couple of years,” said Urs Baertschi, CEO of property/casualty reinsurance for Swiss Re.

Recent high-profile events have “raised awareness that cyber actually is a proper risk and needs proper insurance, and so we believe over the next couple of years, the compound annual growth rate will be significant double digits,” he said.

Cyber capacity, though, will be limited by risk aggregation threats, said Mr. Léger of Scor.

“In cyber, it’s completely different; everything is correlated,” he said, emphasizing the increasingly digital and connected nature of global business.