Increased demand, more capacity available at April 1 reinsurance renewals: Gallagher Re

Reinsurers continued to take on more property catastrophe risk at the April 1st, 2024, reinsurance renewals, which led to an increase in available capacity to meet growing demand in an overall more stable environment, according to Gallagher Re.

Reinsurance broker Gallagher Re’s latest 1st View renewal report, which covers the Japan-focused 1.4 renewal period, reveals that buyers took advantage of reinsurers’ push to grow their property catastrophe books by leveraging multi-class placement strategies to support the more challenging property per risk and casualty treaties.

After strong growth at the January 1st, 2024, renewals, Gallagher Re reports that reinsurers continued to search for growth in property cat at 1/4, which led to an increase in available capacity and also incremental growth in risk-adjusted pricing at firm order terms, mostly at the top end of property programmes.

Although the April renewal period is focused on the traditional Japanese renewals, it’s also an important date for some significant US and worldwide placements, as well as Indian and other Asian markets.

In terms of property rate movement at 1/4, in Japan, property cat loss-free business saw a risk-adjusted rate change of -5% to +1%. In terms of insured losses, 2023 was a benign year for nat cats in Japan, and Gallagher Re notes that demand for capacity from buyers was down slightly year-on-year, with some increases in retentions offset by a small amount of additional capacity purchased.

In the US, property risk loss-hit business saw price movements of +5% to +25%, while cat loss-hit business saw movements of 0% to +20%, and cat loss-free business saw a change of -15% to +5%. Gallagher Re states that although there are limited renewals of meaningful size at 1/4, the placements that were in the market suggest a continuation of the themes witnessed at 1/1 2024.

In Latin America, property risk-loss hit business saw price increases of +5% to +30%, and increases of +5% to +15% occurred for cat loss-hit business. Both property risk loss-free and cat loss-free business saw price movements of 0% to +5%. According to Gallagher Re, in Latin America and the Caribbean, balance sheet strengthening in 2023 and increased availability of retrocession at 1/1 2024 meant that more property cat capacity was available to clients renewing this year.

Outside of property, the reinsurance broker warns that US casualty and financial lines markets continue to face challenges following increased prior-year adverse development reported in 2023 in the casualty space, and ongoing reductions in insurance pricing, notably for public D&O coverage. Gallagher Re says that this resulted in US casualty reinsurers offering varying shares in the same classes of coverage depending on the client.

“Broadly, the market has more capacity available, which is really encouraging. Industry capital has gone up by about 12% thanks to better combined ratios, fewer losses from natural disasters, and improved investment income. This means there’s more room to accommodate clients’ needs and should lead to better terms and conditions as a result. However, recent events in Baltimore remind us of the ever-changing dynamic market we are operating in,” said Tom Wakefield, Gallagher Re’s Chief Executive Officer (CEO).

“Overall, at the 1st of April property and specialty buyers able to access increased capacity were able to firm order and clear programs at improved terms and secure support in critical non-cat areas. It remains to be seen if the reinsurers who are falling behind growth targets will maintain the same pricing discipline at the mid-year renewals which represent the last chance to achieve their 2024 revenue goals,” added Wakefield.