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Property catastrophe rates dropped globally during 1/1 reinsurance renewals

Property catastrophe rates dropped globally during 1/1 reinsurance renewals

Property catastrophe rates dropped globally during the Jan. 1 reinsurance renewals, with the Asia-Pacific region experiencing the largest decline at 7.2%, according to Guy Carpenter & Co.

Guy Carpenter’s global Rate on Line (ROL) Index showed an average rate decrease of 6.6% for the renewal period. The U.S. property catastrophe ROL Index declined by 6.2%, while Europe saw a 5.3% drop.

The ROL Index tracks changes in the cost of coverage year-over-year on a consistent program base. It accounts for factors such as exposure growth, evolving risk measurement methods, shifting buying patterns, and broader market conditions, the broker noted.

Risk-adjusted rates for property catastrophe programs without loss impacts fell between 5% and 15%, with regional variations based on attachment points and reinsurer pricing views. In a previous update, Guy Carpenter reported that pricing varied significantly across regions.

The broker highlighted that property catastrophe renewals saw strong demand from reinsurers, with capacity increasing by 10% to 15%.

However, demand from cedents only grew by about 5%. Loss-hit layers in the U.S., Europe, and Canada had sufficient capacity, with risk-adjusted rates in these regions ranging from flat to a 30% increase.

Guy Carpenter attributed the added capacity and rate reductions to reinsurers’ strong appetite following a profitable 2024. The broker projects an average reinsurer return on equity of 17.3% for the year.

Total dedicated reinsurance capital rose 6.9%, reaching $607 bn by the end of 2024. This marks an increase from $568 bn in 2023. Traditional capital accounted for $500 bn of the total, while alternative capital contributed $107 bn.

The broker noted that reinsurers maintained discipline regarding attachment points and pricing while cedents took steps to improve portfolio profitability through rate adjustments, limit management, and careful risk selection.