Prior to the Monte Carlo Rendez-Vous de Septembre, the Big Four reinsurers gave the impression of stability, while brokers have stuck with the rhetoric that reinsurers must take back more risk.
In a press conference which took place in the run up to the Rendez-Vous, Munich Re management board member Thomas Blunck said that Munich Re’s core message “is that our risk appetite, our strategy, our setup goes on,” he said. “No big changes, broadly speaking. Quite stable.”
He also noted that while global reinsurance capacity is robust enough to cope with demand, there is “definitely not an excess of capital” in the market.
During Insurance Insider’s Day 1 virtual roundtable, Blunck described the market environment as “fragile” and said the current market equilibrium was “susceptible to change”.
Scor P&C CEO Jean-Paul Conoscente added that the mid-year renewals have set the stage for a more competitive reinsurance market in 2025.
He explained that “appetite continues to come with high return expectations and available capacity remains insufficient to meet increasing sponsors’ demand”.
In terms of the casualty market, reinsurers have noted that the market is “converging” around a “negative” view of US casualty business, pointing towards an increase in upwards pricing pressure at 1 January.
The comments come amid increasing anxiety about the status of the 2015-19 US casualty accident years, for which some reinsurers have re-reserved extensively, and the more recent casualty accident years of 2021-23.
Scor group CEO Thierry Léger said in an interview with this publication that reinsurers may have been “too optimistic” about the health of the younger accident years, which had previously been seen as more stable than the pre-Covid-19 years.
Axis CEO Vince Tizzio echoed this outlook, calling casualty a “bumpy” class of business. He said: “We’re saying no a lot in liability reinsurance.”
He added that Axis is “not trying to trade volume”, with its growth in the class this year driven entirely by rate.
Similarly, Swiss Re’s P&C Re CUO Gianfranco Lot said in a press conference prior to the Rendez-Vous that Swiss Re will continue to be “very cautious” around US liability lines, given the stress in the class of business.
Reinsurers have also held firm to their view that higher retentions have returned them to their true reinsurance roots.
Hannover Re said securing higher retentions on North American cat business over the past two years had led to “satisfactory results”.
There has been a clear appetite from reinsurers to grow, although it comes with some degree of caution. Reinsurers have been badly burned in the past decade and are looking to insulate themselves from the growing threat of secondary perils.
For most, this means maintaining high attachment points and refusing aggregate deals to reduce their exposure to mid-sized events.
Sven Althoff, board member at Hannover Re, said the 2024 loss experience would “certainly have an impact” on individual market dynamics by region and line of business.
“The market will seek to defend its profitability, which has finally reached adequate levels after years of soft market conditions,” he said. “For 2025, we expect a more stable supply and demand, as reinsurers’ improved returns will allow them to gradually increase capacity to meet client demand.”
Swiss Re, Munich Re, Hannover Re and Scor are heading into the autumn with a stellar 2023 record under their belts and a profitable 2024 highly likely, hurricane season willing.
Pricing overall has continued to increase in every major renewal so far in 2024, and there is no expectation of a sudden reversal.
The continued rise in demand for coverage, coupled with the lack of new capacity entering the sector, also stands in the quartet’s favour – although a second year of stand-out returns may attract more capacity in 2025.
Brokers
Some brokers, however, have ramped up rhetoric around the need for reinsurers to take back more risk.
“If the reinsurance market is to provide real value, it must play a more active role in helping insurers to manage frequency losses and earnings volatility,” Rupert Moore, UK CEO of reinsurance solutions for Aon, said in the broker’s reinsurance renewal report.
In a video with Insurance Insider at the Rendez-Vous, co-CEOs for EMEA at Aon Reinsurance Solutions Alfonso Valera and Tomas Novotny were also bullish in their defence of clients.
“We’d like to see reinsurers take on more risk, as opposed to shying away from risk, which is what we believe has been happening,” Valera said.
He added that clients were “demanding” that change and Aon would be “asking reinsurers to have more skin in the game” during this year’s renewal discussions.
Novotny called on reinsurers to “work on” their relevancy and start supporting the interest of clients with volatility solutions.
On the other hand, Gallagher Re CEO Tom Wakefield noted during the Day 1 roundtable that insurers face “challenges in balancing revenue growth in a softening market with investor expectations to manage volatility”.
He added: “It is important to strike a balance to avoid severe cyclical swings and maintain market efficiency.”
Guy Carpenter’s global specialties CEO James Boyce also said cedants would be “demanding more consistency on wordings, improvements on terms and conditions and more flexibility on attachment points” during renewal talks.
He added that the global specialty reinsurance market was now in a period of “relative stability” following recent “market upheaval”.
With strong rating adequacy having been achieved across many business lines, Boyce said that capacity is available to meet demand outside of a few challenged areas. He noted that there is increasing consistency in the coverage available.
He caveated, though, 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.