A new baseline for reinsurance has been reached - Everest Re

Today’s heightened risk landscape has become the “new normal” on a global scale, but reinsurers have adjusted their strategies to meet the needs of the market and help clients and cedants navigate this increasingly complex world of risk.

As we prepare for renewal conversations, pricing, terms, and conditions are always a focus for reinsurance executives. We are experiencing the best property reinsurance underwriting conditions in many years and brokers will be keen to find pricing improvements for buyers of reinsurance.

At Everest, we expect this disciplined cycle to continue well into next year. 

It has been perpetuated by several key factors, all of which are contributing to the heightened risk environment. Major market-moving events have become more connected and compounded on a regular basis.

The frequency and severity of natural catastrophes have dramatically increased, with 2024 insured losses already reaching $61bn as of Q3, which is 25% above the ten-year average, according to Gallagher Re.

Hurricane Beryl, the earliest Category 5 storm on record, hit the United States in July, with Moody’s estimating industry losses could be as high as $4.5bn. Additionally, we are contending with an unstable political and global economic environment. Cybersecurity is also top of mind.

The recent CrowdStrike incident disrupted a variety of global industries including aviation, financial services, media, and healthcare with an estimated $1.5bn in insured losses, according to CyberCube.

There is a close connection between these risks and the demand for property and casualty (P&C) reinsurance as companies analyze and continually reassess their strategies and exposures.

In the current environment, cedants cannot afford to work with anything less than the most reliable partners – A+ rated reinsurers with diversified portfolios and a proven track record of profitability, capable of providing the consistency and quality capacity that enables them to navigate change, and future-proof their businesses.

When catastrophe strikes, our industry acts as first financial responders, playing a vital role in restoration and continuity.

However, it is imperative that reinsurers are paid for the protection we provide and the risk we assume in an increasingly dangerous world.

As we approach another January renewal season, particularly with a new level of discipline in the market, we expect favorable property pricing conditions to continue, driven by the availability of new quality capacity, and we anticipate that returns will remain adequate.

On the US casualty reinsurance side, we believe rates will continue to strengthen because of the ongoing issue of social inflation and legal system abuse.

We also expect ceding commissions to decline but not by enough and that more will be needed for better risk alignment. As a result, demand for reinsurance will increase, but supply will be driven by disciplined players who have positioned themselves to withstand challenged market conditions. Cedants refining their panels will continue their flight to quality, which will keep the renewal process competitive.

In specialty lines, we have seen that pricing has been impacted by escalating and ongoing global conflicts, and in a similar way to marine, aviation, and political risk, we expect to continue to see rates and terms continuing to improve.

Approaching 1/1, the market remains disciplined, and trading conditions have continued to be favorable, particularly in property and specialty lines. We see incremental demand from cedents, who are prioritizing partners that are capable, trusted, and in it for the long-term – committed to fulfilling their complex needs.

While competitive, those best positioned to lean into these opportunities are reinsurance partners, like Everest, that are prepared to meet this moment with unparalleled strength and adaptability. As we look ahead, we expect risk-adjusted returns to remain attractive through upcoming renewals and into 2025, with strong partnerships essential for adapting to the evolving risk environment and supporting continued growth.

Jill Beggs is Everest Reinsurance executive vice president and chief operating officer.