Global reinsurance market has faced a very late, complex and in many cases frustrating renewal 1/1 2023. As anticipated before negotiations commenced, the two areas of most constraint were peak-zone US property catastrophe capacity and coverage for strikes, riots & civil commotion and war. As renewals approached the end of the year, the market became more bifurcated, according to Gallagher Re.

  • A divergence between reinsurers prepared to provide clear lead terms and capacity and others who waited for firm orders in an effort to adjust terms at the last minute
  • Clients with broad trading relationships facilitated negotiations with some reinsurers to be ‘packaged’, helping generated preferred pricing and/or increased capacity
  • European property renewals generally being completed earlier than those for U.S. clients albeit much later than the previous norm, in some instances by as much as a month or two
  • A casualty treaty market viewed as calmer and more rational than other parts of the business, and with renewals completed at terms seen as tough but fair by most buyers
Global Reinsurance Market Faced a Very Complex & Frustrating Renewal

In most lines and regions, buyers have largely been able to source capacity, albeit at a higher cost and in many cases changed structures with an increase in attachment points and the raising of the ‘floor’ on minimum rates on line, a key focus for many reinsurers.

The renewal process has been gruelling for participants, many of whom have not faced such a rapid change in market conditions across a single renewal season.

Whilst in a changing market frustration is easily felt by all participants, several buyers perceived that their efforts to approach markets early with more detailed renewal presentations addressing reinsurers’ concerns over inflation and coverage were not recognized (see How Global Reinsurance Market Endured a 2023 Renewals?).

Times of significant market change are always challenging to navigate but we have seen a significant difference in the ways that individual reinsurers have reacted despite a widespread stated ambition to grow premium volumes in what is being viewed as the best treaty underwriting terms and conditions for a generation.

Only a limited number of reinsurers were prepared to offer quotes in a timely fashion leading to difficulties for clients and their brokers to find market clearing prices, terms, and conditions.

Political violence renewals have been especially demanding in terms of finding a market consensus. The differences in opinion between buyers and sellers were aggravated by the perception that there was time to reach agreement on the complex issue of the Ukraine/ Russia conflict well in advance of renewals (see Reinsurance Rates for Property Catastrophe Forecast 2023).

This final point perhaps best illustrates the challenge facing many clients. The primary liability market has seen improved trading conditions for insurers for the last four to five years and did not require a hardening reinsurance market to provoke its own ‘turn’.

Global Reinsurance Market Faced a Very Complex & Frustrating Renewal

Reinsurers, while wary of prior year development in some instances, saw the benefit of improved original pricing and consequently reinsurance capacity and pricing has remained relatively constant.

In addition, the significant increase in interest rates over the last 12 months is providing additional support for reinsurers, a benefit they have not enjoyed for many years.

Conversely for short-tail lines, insurance pricing in recent years has not seen the same degree of price increases as witnessed in the longer tail lines. This competitiveness has been facilitated by a reinsurance market willing to provide attractive terms with plentiful occurrence and aggregate capacity.

For 2023, the property treaty market has hardened considerably, and now many clients face the challenge of increased reinsurance costs, increased retentions and more restricted coverage knowing that the original market pricing environment will take time to move upwards, particularly for personal lines business and the US admitted market.

The current economic climate makes this predicament even more challenging. It is for this reason that buyers were inclined to favour reinsurance partners taking a longer-term view on adjusting pricing, terms and conditions.

For property Risk renewals there has been less regional differentiation and a more uniform approach adopted by reinsurers seeking to improve their returns on a globally under performing class of business.

Capacity has been restricted with reinsurers wanting to see the impact of original underwriting changes some buyers were starting to introduce in their portfolios before committing additional capacity.

There are, however, reasons for cautious optimism. The improvement in pricing and conditions, most notably in property treaty business, has led to some new capacity coming into the market from a combination of modest capital raising by existing reinsurers, a reallocation of internal capital from some reinsurers, and notably some primary carriers with existing reinsurance operations.


AUTHOR: James Kent – Global CEO, Gallagher Re

Fact checked by Oleg Parashchak

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