AJ Gallagher CEO highlights orderly 1/1 reinsurance renewals

In Arthur J. Gallagher & Co.’s Q4 earnings call, J. Patrick Gallagher, Jr., Chairman and CEO, provided insights into the 1/1 renewals in the reinsurance market, highlighting an orderly process and a more balanced supply-demand dynamic.

The CEO noted a continued strong demand for property catastrophe cover, met by sufficient reinsurance capacity from existing reinsurers and cat bonds.

“Importantly, reinsurers continue to exercise discipline on pricing and terms, not giving back the structural changes achieved last year,” he said.

In the casualty sector, Gallagher noted that while there was adequate supply, most treaties faced pricing pressure, while specialty lines saw mostly flat renewals, but limitations persisted on war-related products.

“So, in our view, insurance and reinsurance carriers continued to behave rationally, pushing for rate where it’s needed to generate an acceptable underwriting profit. Property is still needing rate. And more and more, we’re hearing about the need for rate in casualty lines. The prior year development turns into a big concern, we think it could be a multi-year journey of rate increases,” he said.

Gallagher explained that approximately 45% of the broker’s business was booked at 1/1 renewals.

“So, this year when it comes to cat, property is pretty much in the bank. And it’s been a great year. Easier to place than last year, but as I said, demand up and pricing up,” he added.