Reinsurers have significantly increased their capacity, with appetite growing by 10% to 15%, outpacing an estimated 5% rise in demand. On January 1st, non-loss-impacted property catastrophe renewals saw risk-adjusted rate reductions ranging from 5% to 15%, according to Guy Carpenter’s latest report.
The price adjustments varied depending on factors such as regional differences, attachment points, and reinsurer assessments of price adequacy. Despite the reductions in some areas, reinsurers’ overall profitability remains strong, with projected returns on equity for 2024 estimated at 17.3%. Dedicated reinsurance capital has also seen a significant boost, rising by 6.9% to reach $607 billion.
Several factors contributed to these price decreases, including disciplined pricing practices, improved attachment points, and actions by cedants to enhance the profitability of their portfolios. However, reinsurer results were still heavily influenced by attachment points, with catastrophe losses for 2024 expected to reach $130 billion. Notably, the reinsured portion of these losses has dropped to 14%, a significant decline from the pre-2023 average of 20%.
This shift has led to an increased focus on supplemental purchases, such as frequency protection and retention buy-down options, to help balance risk and capital management. While non-loss-impacted layers experienced rate reductions, loss-impacted layers saw price hikes ranging from flat to 30%, particularly in the US, Europe, and Canada.
In the 144A catastrophe bond market, activity remains robust. In 2024, $17 billion in limits were placed across 67 transactions, reflecting continued confidence in alternative risk-transfer mechanisms.
Meanwhile, casualty reinsurance programs presented mixed results. Proportional casualty structures saw ceding commissions remain flat or slightly lower, while excess liability and umbrella placements faced pressure on treaty terms. In response, cedants have provided more detailed claims, rates, and exposure data to secure more favorable terms.
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