Guy Carpenter’s review from January to July 2024 estimates $35-40bn in additional property catastrophe reinsurance purchased globally due to favorable conditions. This rise represents 5% to 10% of total catastrophe capacity bought.
By the start of 2024, a healthier balance had returned to the global property catastrophe market.
Reinsurers’ recovering profitability, coupled with additional available capital, created favorable conditions for cedents to evaluate additional property catastrophe limit purchases.
- Estimated global property catastrophe limit purchased increased USD 35-40 billion through H1 2024, with more than 50% of increased limit originating in North America across a wide range of companies.
- Reinsurer profitability improved going into 2024, incentivizing reinsurers to utilize increased levels of capital in property catastrophe.
- Risk-adjusted pricing trended down by mid-year, particularly on middle and upper layers, giving buyers greater ability to increase purchases.
- Record for catastrophe bonds as investors sought opportunities to participate in improved market conditions.
Demand increased worldwide, and reinsurers met this need, achieving market equilibrium.
In North America, over 60% of property catastrophe contracts included expanded limits, with the top 20% purchasing over $100mn more in coverage.
Traditional reinsurers provided most of the added capacity. Insurance-linked securities contributed mainly through catastrophe bonds and investor support for traditional reinsurers.
Mid-year renewals reflected a transitioning reinsurance market meeting demand in a dynamic trading environment.
Loss-free property programs saw easing of pricing, even as demand increased. Casualty renewal outcomes varied by sublines as well as reinsurance type.
General liability and excess/umbrella placements that are US exposed experienced continued reinsurance pricing pressure for excess of loss programs, while quota share outcomes were tied to the amount of adverse development.
Looking to 2025, Guy Carpenter expects factors like property valuation increases, exposure growth, model changes, and continued risk mitigation to drive further demand.
Key factors affecting buying decisions over the next 12 months include:
- continued (albeit lesser) increases in property valuations;
- growth in overall exposure;
- model version changes;
- focus on continued risk mitigation.
Heading into 2024, significant sector corrections in pricing and attachment points drove a return to profitability in the property reinsurance sector.
Simultaneously, reinsurers had access to increased capital to allocate to placements, and had incentive to do so, creating an environment that was more favorable for cedents to evaluate increasing their levels of property catastrophe reinsurance.
With minimal movement in net limits purchased over the past couple of years during more difficult market conditions, there was material interest in additional limit coming into 2024.
Significant inflationary pressure grew underlying valuations and, therefore, cedents’ exposures to loss. Greater market stability, and moderating pricing in a number of segments, provided cedents with better ability to budget for additional levels of coverage.
