The global specialty reinsurance market has entered a period of relative stability following several years of volatility, which included significant rate hikes, tighter terms and conditions, and higher attachment points.
According to Guy Carpenter’s 2024 Market Update, strong rating adequacy has been achieved across many business lines, and capacity is generally available to meet demand, except in a few challenged areas. Reinsurers in the specialty sector have managed to maintain strong performance, with market opportunities continuing to present themselves.
Much of the recent turbulence stemmed from predicted losses that have not fully materialized. While some notable events have occurred, the expected catastrophic financial impacts have not significantly affected the market, despite being the basis for many of the recent rate increases.
As the renewal season approaches, buyers are expected to seek coverage at rates that reflect their risk profiles and the improved performance of underlying portfolios. Discussions with reinsurers will likely focus on consistency in wordings, more flexible attachment points, and improvements in terms and conditions.
Guy Carpenter notes that the Russia-Ukraine conflict remains a significant factor at renewal. Other major concerns include the ongoing monitoring of the Baltimore loss, growing geopolitical tensions, and how the hurricane season will play out given active forecasts.
Data will play a crucial role in aligning client requirements with reinsurer offerings, with insights driven by exposure modeling, market analysis, and evolving risk profiles.
In the non-marine sector, demand for peak peril retrocession (retro) coverage and direct and facultative (D&F) limit saw a notable increase in the second quarter of 2024. Following the April 1 renewals, appetite grew for retro excess-of-loss (XoL) coverage, particularly from buyers looking to re-enter the market.
Despite an overall strong performance in quota share business, the retro space continues to face more demand than supply for quota share capacity. The North Atlantic hurricane season remains a key factor ahead of the Jan. 1, 2025, renewals, with attachment points likely to be central to discussions.
In the terrorism sector, abundant capacity has driven flattening rates, despite upward rating movements in recent years. Guy Carpenter highlights that while actual losses have been limited, concerns about potential social unrest or political upheaval following global elections could affect the rating trend in certain regions.
Many cedants have been de-risking portfolios focused on strikes, riots, and civil commotion (SRCC) and war, while growing their terrorism business, which is seen as less volatile. Capacity remains available, but reinsurers are paying close attention to how portfolios are managed, particularly in political violence perils.
Marine and energy markets continue to face volatility, with geopolitical tensions and the ongoing war in Ukraine influencing the sector. The full impact of the Baltimore bridge loss remains unknown, but the market has adopted a cautious approach.
Reinsurers in the marine and energy space have continued to perform well, maintaining the positive trading environment of recent years. While proportional business remains strong, there are still challenges in developing effective XoL cover to manage the energy transition.
As the renewal season approaches, Guy Carpenter advises that data-driven insights and close collaboration between clients and reinsurers will be essential for navigating the evolving market dynamics across specialty reinsurance sectors.
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