As the reinsurance renewal period gets underway, buyers are expecting to secure coverage at rates more commensurate with their risk profile and reflecting the improved performance of the underlying portfolios, according to Guy Carpenter’s CEO, Global Specialties, James Boyce.
Alongside the release of the reinsurance broker’s Global Specialties Market Update, Boyce said cedants would be “demanding more consistency on wordings, improvements on terms and conditions, and more flexibility on attachment points” during renewal talks.
“The value of coverage will be just as important as the price,” he said.
Boyce said the global specialty reinsurance market was now in a period of “relative stability” following recent “market upheaval”.
He said that with strong rating adequacy having been achieved across many business lines, capacity is available to meet demand outside of a few challenged areas. Boyce noted that there is increasing consistency in the coverage available.
“Reinsurers have overall achieved a strong performance in the specialty sector, and the market continues to provide opportunities,” Boyce said.
However, Boyce said that much of the turbulence in recent years has stemmed from predicted losses that have yet to materialise.
“While the sector has experienced some sizeable events, we have not seen the catastrophic financial impacts – which have been the basis of a large proportion of the rate increases – flowing through into the market,” he said.
Boyce said that data “will be core to achieving a strategic alignment” between the requirements of Guy Carpenter’s clients and reinsurers at 1 January.
Non-Marine retro demand up
The market update released this morning highlighted that the second quarter of 2024 saw a significant increase in demand for peak peril retro coverage and cat on direct and facultative (D&F) limit.
Demand for retro XoL coverage increased following the 1 April renewals, driven by appetite from buyers at 1 January for peak peril retro top up limit and new buyers looking to re-enter the market, GC said.
Lower-level cover remains a fairly narrow market, but brokers are keen to get more reinsurers back into that space.
The broker said that results in quota share have been strong, so more markets are willing to deploy capacity on a quota share basis. However, in the retro space, there is still more demand than supply for quota share capacity.
Overall, GC said the biggest issue ahead of renewals is what happens during the remainder of the North Atlantic hurricane season. There is currently sufficient capital in the market to meet demand, but more is likely to be deployed, which will impact overall cost and supply dynamics.
“Clients buying a material amount of capacity should be assessing as many pools of capital as they can – traditional reinsurers, ILS reinsurers for occurrence and aggregate, as well as quota share and cat bonds or looking at index products,” John Fletcher, CEO, Bermuda said.