The reinsurance market has continued to benefit from years of better pricing in property, casualty, and specialty areas, marking a strong financial position at the January 1 renewal, a report by global reinsurance broker Gallagher Re found.
In its 1st View annual report, the broker found that as reinsurers benefited from the increases in primary insurance prices, they also gained more due to higher reinsurance prices, stricter terms, and a reset in property catastrophe attachment points. They were expected to achieve a combined ratio either near or below 90% as well as a low teens return on equity for 2024, globally.
Gallagher Re CEO Tom Wakefield pointed out that the market saw a variety of results in 2024.
“In areas where growth was most sought, pricing pressure peaked, resulting in reduced risk-adjusted pricing in property catastrophe and specialty, except for loss-impacted programs,” said Wakefield.
He added: “The US casualty market remains divided, with some seeing opportunities to expand amid uncertainty, while others adopt a cautious approach. The complexity across business lines and regions has enabled brokers and reinsurers to collaborate closely with buyers, enhancing alignment and risk assessment.”
When it comes to property, the catastrophe market was closely watched because of its disproportionate contribution to reinsurers in relation to the actual premium derived. There was also an increase in the number of reinsurers that were ready to support low level occurrence and aggregate protections on both a structured and traditional basis for some buyers.
The casualty market in the US experienced tighter capacity in contrast to the global property and specialty segments. There were some reinsurers that were hesitant in writing casualty business because of the strict combined ratio targets. Reinsurers that were focusing on overall economic profitability saw the potential in the casualty segment even if there were constraints in capacity.
Meanwhile, the international casualty markets were more competitive and were less concerned about US exposure because of the perceived improvements within its primary market. Buyers that were well-prepared were set to achieve positive results, while those that were only relying on the indices of the market were facing challenges.
When it comes to the specialty market, there were changes seen in aviation, cyber, marine, energy, mortgage, credit and surety, and political violence and terror. The improvements in trading conditions and capacity gave buyers more power to negotiate but significant claims may impact previous reinsurance results and trading balances. This can limit the possible impact of supply and demand on pricing and terms.
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