‘Transitioning reinsurance market’ at 1/7 – Guy Carpenter

Mid-year renewals reflected a transitioning reinsurance market meeting demand in a dynamic trading environment, according to Guy Carpenter.

Loss-free property programmes “generally saw easing of pricing, even as demand increased”, the reinsurance broker asserted.

Casualty programmes were also completed “with adequate capacity, pricing and underwriting scrutiny persisted due to a variety of market trends”, the broker acknowledged.

President and CEO of Guy Carpenter, Dean Klisura (pictured), said: “Well-positioned cedents achieved greater concurrency and pricing consideration in this positive but still cautious trading environment.

“However, headwinds, including unsettled macroeconomic conditions and the geopolitical environment, are leading to shifting risk appetites. Guy Carpenter provides perspective to our clients to help differentiate them and find the best solutions possible.”

The preliminary mid-year Guy Carpenter US property catastrophe rate on line (ROL) index was “near flat year-on-year”, the broker said.

This is an alternative measure of price change that incorporates the impact of structural adjustments and current views of risk on actual dollars paid.

According to Guy Carpenter’s analysis, the majority of property placements were completed early to on time, while risk programs remained under scrutiny amid continued concerns about the frequency and severity of large risk losses.

Global property catastrophe reinsurance risk-adjusted rates at mid-year were “generally flat to down mid- to high-single digits”.

In some cases, upper layers were risk-adjusted down 10% or more for non-loss impacted accounts, in what the broker termed “a moderating but still robust pricing environment”.

Casualty renewal outcomes varied by sublines as well as reinsurance type, according to Guy Carpenter.

General liability and excess/umbrella placements that are US exposed experienced continued reinsurance pricing pressure for excess of loss programmes, while quota share outcomes were tied to the amount of adverse development, the broker said.

For financial lines, Guy Carpenter said that downward pressure on ceding commissions continued.

This was driven, the broker said, by public directors and officers (D&O) portfolio concentration, underlying rate environment and continued prior year development.

The cyber reinsurance market remained active at mid-year renewals, with buyers finding improved terms across all structures, the reinsurance broker said.

Mid-year cyber renewals saw “ongoing interest in alternative structures”, including event-based covers, continuing a trend observed at the start of 2024.

Catastrophe bonds had a record first half of the year, Guy Carpenter said, with the second quarter being the most active quarter recorded.

By June 24, some 47 different catastrophe bonds were brought to the 144A market for approximately $11.9bn in limit placed, taking the total outstanding notional amount to more than $44.6bn.

Through the first quarter, most retrocession buyers sought to secure similar limits to 2023, according to Guy Carpenter.

Mid-year purchasing saw “increased demand in Q2” from existing buyers along with historical buyers returning to the market.

Drivers of this increase were noted as improved purchasing dynamics relative to 2023, underlying portfolio growth and active North Atlantic wind season forecasts.

“The reinsurance industry has responded to measurably increased demand in 2024, which has materialized at a level above many expectations,” said David Priebe, chairman, Guy Carpenter.

“Reinsurers’ attractive returns and improved capital positions are facilitating increased capacity in several sectors. Guy Carpenter is set to strategically help our clients in this new era of risk,” Priebe added.