Reinsurance rate tightening continues – report

The reinsurance market continues to experience rate tightening, according to a report from global reinsurance broker Howden Tiger.

According to the report, risk-adjusted property catastrophe pricing increased by an average of 33% as of June 1, falling within a typical range of 25% to 40%, with significant variations by layer. This follows a 25% rise in 2022, taking the index to its highest level since its inception.

To explain the increase, Howden Tiger pointed to persistently low levels of capital relative to risk, as well as various global and local pressures. The impact of Hurricane Ian and portfolio trends, as well as concentrations in Florida, contributed to fluctuations in risk-adjusted rate changes. Some loss-affected programs saw increases of more than 40%, depending on the magnitude and effect of the losses. Top layers, such as seismic and wind cover, also saw year-over-year increases of more than 40%, influenced by new minimum line pricing thresholds.

Wade Gulbransen, Head of North America at Howden Tiger, emphasized the need for strategic planning and aggressive investment strategies in the current market environment.

“In this one-of-a-kind market, it’s critical to ensure customers can get the coverage they need…It’s about finding the right capacity that matches the risk profiles and financial goals of our customers while adapting to a changing industry,” he said.

Market engagement in preparing for the renewal process has played an important role in ensuring capacity availability. Private placements, which have been seen in previous renewal cycles, have continued as a means of quickly securing capacity rather than filling gaps.

“Commercialization of many June 1 programs began in late January with strategic placements setting the tone as early as March, when a noticeable appetite for upper layer risk from traditional capacity providers and ILS emerged,” said Gulbransen.

David Flandro, head of industry and strategic advice at Howden Tiger, described the reinsurance market as being in a period of transformation shaped by a confluence of events.

“The reinsurance market is in a period of transformation, shaped by a coalescence of events… amplified risk aversion,” Flandro said.

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