Reinsurance pricing in 2023 continues to be an important topic

Reinsurance pricing continues to be an important topic suggesting 50%+ property cat price increases in the US are a real possibility with the potential that year end renewals don’t get resolved until well into January. Strain on capacity could push some insurers to retain more risk potentially increasing earnings but adding volatility.

According to Goldman Sachs, the current environment favourable despite the macro uncertainty. However, new capital has not shown up to help with a restrained reinsurance renewal.

Rate increases for catastrophe reinsurance renewals elsewhere, including Europe, could still be some of the most significant seen for years.

Auto insurance rate taking off next year, alluding to a conversation with Allstate.

Allstate discussed its approach to rate taking in the auto business and expressed a high degree of confidence in restoring the margins of the business. However, it was also mentioned that the company intends on continuing to take rate well into 2023 and prefers to risk overshooting rather than betting on severity trends subsiding.

Goldman Sachs also pointed that reinsurance capacity is strained with rates potentially up by over 50% for US cat.

The capacity strain sounds likely to push conversations into January with some primaries potentially facing decisions about retaining more risk. Both WRB and HIG pointed out that more adequate pricing is also an opportunity for their respective reinsurance businesses with WRB potentially having an opportunity to deploy more capital this year.

Net investment income is a strong tailwind, while more business is spilling over into excess and surplus lines.

The re/insurers are mentioned the potential for more business to be written out of E&S markets as freedom of rate and form will be of increased importance.

While HIG is more of a standard lines underwriter, the management team also seamed optimistic on growth opportunities for the Navigators specialty business.

While it’s not clear exactly how strained reinsurance capacity will impact property spill over into E&S markets, we felt at a minimum it’s likely to see E&S continue to outgrow standard lines business in 2023.

by Yana Keller