Reinsurance outlook improves for buyers

ORLANDO, Fla. — Phrases like “buyer-friendly” and “cedent leverage” were used regularly by market participants last week to discuss the property reinsurance market at the most recent renewal meeting.

During sessions and interviews at the annual meeting of the American Property Casualty Insurance Association, reinsurers and brokers discussed a market that is easing for several lines.

Ample property capacity could lead to double-digit premium declines for some cedents; however, casualty markets are more cautious but willing to grow selectively, especially to support other lines, they said.

“Cedents are coming to the market with more leverage than they’ve had in years and years,” said Kathy McCann, managing director and U.S. deputy segment leader, Guy Carpenter & Co.

There is sufficient supply in the property reinsurance market to meet rising demand, said Matt Junge, Schaumburg, Illinois-based head of property underwriting U.S. at Swiss Re.

“We continue to see exposures increasing and model change, which is driving increased property limit across the board. We saw that this year. I think we’ll see that again.”

Premium declines at mid-year property renewals will continue and may accelerate.

“We expect things to be off double digits this year,” said Randy Fuller, Tampa, Florida-based head of the North American property center of excellence and Florida segment leader for Guy Carpenter.

Some cedents may be hoping for “pretty significant” double-digit decreases, “so it’ll be interesting to see where the market lands,” he said.

Similar decreases were seen in June and July, Mr. Fuller said.

The property market will be “competitive, and we’ll see continued modest softening in price,” said Laura Murphy, Minneapolis-based senior broker and leader, property, North America, at Lockton Re.

Property markets “continue to be a buyer-friendly environment,” but program structures will likely be unchanged, she said.

There remains “a very strong sentiment around maintaining structure and keeping retentions where they are. I see that continuing to hold in the near-term cycle,” Ms. Murphy said.

Reinsurers, though, are becoming more competitive around defendingto defend existing lines on programs and may be open to “expanding their appetite modestly to support lower layers or different components of the program to really defend what they want to maintain.”

A focus of casualty reinsurance negotiations will be how well insurers have implemented planned changes or improvements to underlying businesses, said Christopher Ross, New York casualty treaty manager at Guy Carpenter.

There’s sufficient capacity to complete programs, and some reinsurers are looking to grow more, said Nick Nudo, Chicago-based U.S. casualty segment leader for Aon’s reinsurance business.

“We’ve seen several reinsurers coming to us, telling us quietly, they’d like to expand their casualty” selectively, in specific lines with specific clients, he said.

Some ceding insurers may look to pair their increased demand for property catastrophe capacity from reinsurers with efforts to secure more casualty coverage.

“Insurers will favor reinsurers that support their property and casualty portfolios on a more holistic basis,” Mr. Nudo said.

“For most reinsurers, the messaging has been a desire to grow with existing clients,” said Ms. Murphy of Lockton.