4.1 reinsurance renewals draw more capacity; property pricing wavers

Rising reinsurance capacity greased another set of reinsurance renewals, tipping risk-adjusted property and property cat pricing lightly to the downside in key markets, global reinsurance brokerage Gallagher Re said of the just-completed 4.1 renewals. 

The property cat side of the renewals showed “a continuation of reinsurance markets moving to ‘risk on’ in the search for growth,” Gallagher Re claimed in its first-view report. That meant ever more capacity at the top layers and “incremental improvement” in overall risk-adjusted pricing for cedants. 

Non-cat property showed reinsurers bidding for increased shares, albeit reluctant to grab market at the obvious cost of margin. Narrow spreads in bidding showed that reinsurer appetite for growth, “while significant, was not at any price, terms or conditions”. 

Rising capacity was enough to get Gallagher Re musing about a market turn for the mid-year renewals.  

“It remains to be seen if the reinsurers who are falling behind their growth targets will maintain the same pricing discipline at the mid-year renewals which represent the last chance to achieve their 2024 revenue goals,” Gallagher Re CEO Tom Wakefield wrote. 

The key Japanese market showed relative stabilisation. Property cat quotes showed “an unusual degree of consistency” with a very narrow range of bids. 

Japanese property cat demand proved marginally lower, with added limit offset by rising retentions, while supply saw a “significant uptick”, most notably for the higher layers. 

That left reinsurers to fall in line with the hopes of an “emboldened” set of cedants, submitting “buoyant” capacity to firm order terms and rendering “flat to modest risk-adjusted price reductions”. 

Likewise in Japanese non-cat property, reinsurers had talked tough, but “softened” as firm order terms hit the table, amid a “visible” rise in capacity and even a “significant uptick” in supply of pro rata business. 

Mark Japanese property cat pricing from minus 5% to plus 1% for loss free accounts, Gallagher Re said in its pricing summary. Mark non-cat property in a range from -2.5% to +5%. 

In the US, cat pricing was said to remain disciplined at lower levels, where capacity was called “sufficient”.  Higher up in the towers, clients are taking rate reductions amid stronger capacity, especially where new top-layer purchases in 2023 had proven pricey, even above pre-existing lower layers. 

Non-cat US property was said to have remained firmer than cat on what Gallagher Re put to a comparative lack of capacity inflows and continued question marks over property valuations, inflation and select weather risk exposures, especially severe convective storm. 

For the Gallagher Re pricing summary, loss-free US accounts priced from 15% down to a 5% gain for cat risks and -5% to +5% for non-cat accounts, the Gallagher Re data indicated. Loss hit accounts all rose in pricing.

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