According to the latest 1st View report from ICMIF Supporting Member Gallagher Re, as the 2023 financial year reporting season reached its conclusion, many companies reported some of the best reinsurance underwriting conditions in over 20 years. The report found that a radical redistribution of risk between primary and secondary markets in property catastrophe and specialty segments during 2023 stimulated a much improved equity story for reinsurers. This optimism has been vindicated says Gallagher Re, with reinsurer valuations being much improved after several years.

Key findings include:

• In the property catastrophe space, 1 April 2024 saw a continuation of reinsurance markets moving to “risk on” in the search for growth, resulting in increased available capacity at the top end of programs and incremental improvement in risk adjusted pricing at firm order terms.
• In the property arena, the quoting process was disciplined and predictably most reinsurers were reluctant to open the bidding with discounts, although many led with a desire to take increased shares.
  • • In the US market, client demand for additional limit was satiated. Year on year pricing comparisons are not possible as new layers have no comparable, however, capacity was readily available for the top end of programmes at pricing that was in line with the underlying placements — bringing an end to any requirement for inverted pricing.
• In specialty classes the quoting process was made more complex with structural changes, including some increased retentions. However, in the final analysis, specialty reinsurance and retro pricing moderated just slightly more than the catastrophe market albeit perhaps from a higher jumping off point.
• The quotation process for the large Japanese catastrophe excess of loss programmes saw an unusual degree of consistency as reinsurers quoted flat to very modest risk adjusted rate increases with few outliers on the upside or downside.
• The market now has more capacity at its disposal, driven by a mix of much improved underlying combined ratios, a light natural catastrophe load (despite insured natural catastrophes across the industry being heavy), and better investment income. This, coupled with increased appetite, should lead to an easing of terms and conditions for clients despite the continued challenges facing the insurance market on natural catastrophe exposure.

The report’s findings indicate that overall, at 1 April 2024, property and specialty buyers able to access increased capacity were able to firm orders and clear programmes at improved terms and secure support in critical non-cat areas.

Download the full report here. The 1st View report delivers insights from Gallagher Re on current market conditions within the reinsurance industry, covering the changes in pricing levels and conditions experienced by Gallagher Re brokers and product specialists. The report is published at the key renewal seasons — 1 January, 1 April and 1 July — to deliver the very first view on current market conditions in the reinsurance industry.