The global property catastrophe market saw notable activity in the first half of 2024, as reinsurers reported improved profitability and increased capital availability, according to the latest insights from re/insurance broker Guy Carpenter.
This created conditions favorable for cedents to consider additional property catastrophe limit purchases. Demand for additional catastrophe coverage rose significantly across various regions, aligning closely with the market's capacity.
Guy Carpenter's review of the market from January to July 2024 estimates that an additional $35 billion to $40 billion in catastrophe limit was purchased worldwide. This figure represents an approximate 5% to 10% increase in catastrophe capacity, including catastrophe bonds, varying by region.
Notably, in North America, over 60% of property catastrophe contracts included expanded limits, with the top 20% of these contracts purchasing over $100 million in additional limit. The majority of this additional capacity came from traditional reinsurers, while the role of insurance-linked securities (ILS) was mainly seen through catastrophe bonds and investor support for traditional reinsurers.
Several market drivers contributed to this increase in catastrophe limits. At the beginning of 2024, the property reinsurance sector experienced significant pricing corrections and adjustments to attachment points, leading to a return to profitability.
Reinsurers, with increased capital at their disposal, were incentivized to allocate more capacity, providing cedents with the opportunity to enhance their property catastrophe reinsurance coverage.
The stable market conditions and moderating pricing in certain segments allowed cedents to budget more effectively for additional coverage levels. This shift occurred after minimal changes in net limits purchased in recent years due to challenging market conditions. Inflationary pressures also played a role, as they increased underlying valuations and, consequently, cedents' exposure to potential losses.
Looking ahead to 2025, Guy Carpenter anticipates several factors will continue to drive demand for increased catastrophe limits. Key considerations for future buying decisions include ongoing, though reduced, increases in property valuations, overall growth in exposure, changes in model versions, and a continued emphasis on risk mitigation. These elements are expected to influence the market dynamics in the coming year.
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