Reinsurance rates fall for loss-free accounts

Jan. 1 reinsurance renewals were broadly down globally as expanded capital coupled with an increased appetite to take on risk drove more competition for property and casualty business.

Property accounts that experienced losses, though, continued to see rate hikes, and U.S. casualty exposures remain under scrutiny over concerns about higher court awards and settlements, experts say.

“Demand was up a little bit with inflation but not to match supply. So that led pricing down, certainly in the U.S.” on the property side, said John Welch, Stamford, Connecticut-based chief underwriting officer, reinsurance, for Aspen Insurance Holdings Ltd.

Pricing was down by low single digits in Europe, he said.

Property price movements varied globally and by loss history, according to London-based Mike Van Slooten, reinsurance sector insights, capital advisory, for Aon PLC’s reinsurance solutions division.

Decreases varied from mid-single digits to mid-teens, reaching double digits down on loss-free business, he said. Conversely, “there were some quite big increases on loss-affected accounts.”

“It varied by region, really dependent on loss activity,” Mr. Welch said.

For property catastrophe programs, “we are observing risk-adjusted rate reductions in the range of down 5% to down 15% for loss-free layers, indicating a more competitive landscape,” said New York-based David Duffy, president, global clients, for Guy Carpenter LLC.

Rates are rising, though, for loss-hit accounts, with increases ranging from 10% to 30%, depending on severity of loss and prior rates, Mr. Duffy said.

Global reinsurance capital grew to $715 billion as of Sept. 30, 2024, up 6.7% from $670 billion at the end of 2023 and 24.3% from $575 million at the end of 2022, according to Aon.

“This renewal was a good reminder that it’s a supply and demand market. The additional supply and modest increase in demand led to significant pressure on pricing,” said Robert Bisset, London-based chairman of global retrocession and property specialty, Bermuda, and market capital for Lockton Re, a unit of Lockton Cos. LLC.

“We’ve had a couple of really good years in the reinsurance industry, and so there is an expectation that we would start to be more competitive, certainly on price,” Mr. Welch of Aspen said.

Capacity is estimated to have increased by 10% to 15%, but demand for cat coverage has only increased by 5%, leading to oversubscription on property catastrophe programs, Mr. Duffy said.

“The majority of placements were oversubscribed even as the clients and broking community pushed rates down,” Mr. Bisset said.

The global casualty reinsurance market outside the U.S is more competitive, said Chirag Shah, New York-based head of global casualty for Gallagher Re, a unit of Arthur J. Gallagher & Co

The market is divided between U.S. and non-U.S. exposed casualty accounts.

“Certainly, there’s a lot of concern in the industry about U.S. casualty,” Mr. Welch said.

“Over the last few quarters, the biggest topic of conversation has really been the performance of certain U.S. casualty lines, and this is to do with social inflation and the litigation environment,” Mr. Van Slooten said. “Some big reinsurers in Europe, for example, have been pulling back on that business for a while, and they remained very cautious.”

For international programs without U.S. exposures, “you’re probably talking about reductions of zero to 5%,” he said.

“The real challenging bit of the market was U.S. casualty,” Mr. Shah said. Portfolios with U.S. casualty exposures drew the most scrutiny during the submissions process, he said. Those accounts were also more likely to see increases as high as 10%, although not every loss-hit account saw an increase, he said.

“There’s a lot of concern around increasing loss trends and what impact that has on profitability,” and available limits have decreased, Mr.  Shah said.

Outside the U.S., pure international business “continues to be a competitive market” for casualty, Mr. Shah said.

Lower layers of casualty towers presented more significant challenges, said Christopher Ross, New York-based managing director, treaty broking, North America, for Guy Carpenter.

“Pricing pressures are more clearly evident in excess of loss placements, where social inflation and the increasing severity of losses are creating challenges for lower attaching layers,” Mr. Ross said.