The reinsurance market continues to experience rate hardening, according to a report from global reinsurance broker Howden Tiger.
According to the report, risk-adjusted property-catastrophe pricing has increased by an average of 33% as of 1 June, falling within a typical range of 25% to 40%, with significant variations by layer. This follows a 25% uptick in 2022, bringing the index to its highest level since its inception.
In explaining the increase, Howden Tiger highlighted the persistent low levels of capital relative to risk, along with various global and local pressures. The impact of Hurricane Ian and portfolio trends, as well as concentrations in Florida, have contributed to the fluctuations in risk-adjusted rate changes. Some loss-affected programs have experienced increases exceeding 40%, depending on the scale and effect of the losses. Higher layers, such as earthquake and wind covers, have also witnessed year-on-year increases of over 40%, influenced by new minimum rate-on-line thresholds.
Wade Gulbransen, head of North America at Howden Tiger, emphasised the need for strategic planning and dynamic placement strategies in the current market environment.
“In this once-in-a-generation market, it is critical to ensure clients can secure the coverage they need... It's about finding the right capacity that fits our clients' risk profiles and financial objectives while adapting to an industry in transformation,” he said.
The engagement of markets in the lead-up to the renewal process played a significant role in ensuring capacity availability. Private placements, which have been observed in previous renewal cycles, continued as a means of securing early capacity rather than addressing shortfalls.
“Marketing for many 1 June programs began in late January with strategic placements setting the tone as early as March when noticeable appetite for higher layer risks from both traditional and ILS capacity providers emerged,” Gulbransen said.
David Flandro, head of industry and strategic advisory at Howden Tiger, described the reinsurance market as being in a transformative period shaped by a convergence of events.
“The reinsurance market is in a transformative period, shaped by a coalescence of events... amplified risk aversion,” Flandro said.
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