BOSTON — Jan. 1, 2024, reinsurance renewals look set to be less contentious and economically painful for cedents than last year, with ample property and property catastrophe capacity available, but coverage is still expected to come at a higher price.

Reinsurers will likely continue to seek rate increases on most accounts, but demand should be met, and some additional property capacity may return to the market, sources said during meetings at the American Property Casualty Insurance Association annual meeting in Boston last month. The event is a key reinsurance renewal meeting for the U.S. market.

Clouds may be forming over the casualty sector, though, as experts point to concerns over loss development, but there has not been any substantial capacity pullback, they said (see related story below).

“There is sufficient capacity in the property market. We don’t yet see prices coming down, but we also don’t see the kind of meteoric rise (in rates) that we saw, especially in calendar year 2022,” said Pete Chandler, San Francisco-based president and CEO of BMS Re, North America, a unit of brokerage BMS Group Ltd.

Property reinsurance pricing should rise but not as sharply as last year, partly due to better communications between buyers, sellers and brokers, said John Welch, Stamford, Connecticut-based chief underwriting officer for Aspen Re, the reinsurance unit of Aspen Insurance Holdings Ltd.

“Expectations have been set on both sides. I think pricing will go up, but clearly not to the extent it did last year,” he said. Some cedents with loss histories will likely “need to pay more,” he said.

At Jan. 1, 2023, renewals, brokers and reinsurers reported rate hikes of between 40% and 100% for North American property exposures.

Aspen Re plans to offer additional property catastrophe capacity at Jan. 1 reinsurance renewals, according to Mr. Welch. “We will probably deploy some more capacity — not significantly more, just a little more in the property space,” he said.

Brokers are helping to manage cedents’ expectations for renewals, said Sharry Tibbitt, Warren, New Jersey-based global head of property and deputy chief underwriting officer of the reinsurance division at Everest Group Ltd.

“It seems like everybody’s expectations are aligned to some degree. Certainly, the brokers are helping to prepare their clients a lot better. I think people were not prepared whatsoever last January,” she said.

“Buyers a year ago didn’t know what to expect,” said Justin Lorence, Minneapolis-based senior broker and co-head of property for Lockton Re, a unit of Lockton Cos. LLP.

This year-end renewal season should be less tumultuous. Over the past year, each successive reinsurance renewal, at April 1, June 1 and July 1, was “incrementally more orderly than the prior” and there was a “relatively stable supply” of capacity, Mr. Lorence said.

Still, property reinsurance prices are likely to rise again at Jan. 1, Ms. Tibbett said.

“I think you will have to pay more than you want to pay. I think that’s the bottom line right now,” she said.

The increases, though, are now being properly budgeted for. “As the year went on, people understood the expectations and budgeted properly. In April, May, June, July, while we were still getting rate increases that were needed and restructuring as needed, they were able to get it done, because they understood how to budget,” Ms. Tibbett said.

“There’s likely capacity at the right price,” said Matt Junge, Schaumburg, Illinois-based head of property underwriting U.S. for Swiss Re Ltd. 

“The market will be orderly this year,” said Monica Ningen, Armonk, New York-based CEO of U.S. property and casualty reinsurance for Swiss Re Ltd. “Prices still need to continue to go up when it comes to property catastrophe exposure but not the big price increases that we saw last year.” 

Attachment points for reinsurance programs, though, are likely to remain at the elevated levels set last year, said Jeff Fleming, partner and senior reinsurance broker for Lockton Re in New York.

“Attachment points rose quite significantly last year,” and do not appear to be going back down, he said. “Markets were looking to make changes.”

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Casualty reinsurance concerns raised as reserves come under scrutiny

Skyrocketing property catastrophe rates dominated commercial reinsurance year-end renewals last year, but this year discussions over casualty rates are expected to have more prominence.

Talk is now turning to potential challenges in the casualty markets, including possible increases in loss frequency and severity trends and concerns about the adequacy of reserves.

“The loss development on the casualty side is concerning a lot of people,” said Sharry Tibbitt, Warren, New Jersey-based global head of property and deputy chief underwriting officer of the reinsurance division at Everest Group Ltd. Executives speaking on recent third-quarter earnings calls raised the issue, she said, adding, “It’s something we’re keeping our eye on.”

Casualty concerns became apparent during the Insurance Leadership Forum in Colorado Springs, Colorado, in October, said Monica Ningen, Armonk, New York-based CEO of U.S. property and casualty reinsurance for Swiss Re Ltd.

“The primary carriers are talking about casualty business. They’re talking about the uncertainty that they see and whether or not it can make money going forward without additional rates there,” she said.

Pete Chandler, San Francisco-based president and CEO of BMS Re, North America, a unit of brokerage BMS Group Ltd., said he began hearing concerns about casualty market reinsurance challenges at the Rendez-Vous de Septembre meeting in Monte Carlo, Monaco, which serves as the unofficial kickoff of year-end reinsurance renewals.

“The conversation started to pivot from property to casualty at Monte Carlo,” Mr. Chandler said. “We are hearing of some increases in reserve development.”

There has not been any meaningful withdrawal of capacity from the casualty reinsurance market, however, said Doug May, Seattle-based president of Gallagher Re North America, the reinsurance brokerage unit of Arthur J. Gallagher & Co. 

“At the end of the day, reinsurance is about supply and demand, so if there’s no big departures, in terms of capacity for casualty placements, we would expect a renewal which is a version of the previous few renewals. That being said, there could be pressure if an individual portfolio has some loss development,” Mr. May said.