Reinsurers adopt risk-on strategy, boost capacity – Gallagher Re

Japanese catastrophe excess of loss programs showed consistent quoting.

On 1 April, the property catastrophe reinsurance market continued its trend towards a "risk-on" approach, resulting in greater available capacity at the top end of programs and incremental improvements in risk-adjusted pricing, Gallagher Re reported.

Reinsurers were generally cautious about offering discounts during the quoting process but were willing to increase their shares.

In the US market, client demand for additional coverage was met, and whilst year-on-year pricing comparisons were challenging due to the absence of comparable new layers, capacity was readily available at pricing consistent with underlying placements. This ended the need for inverted pricing.

In specialty classes, the quoting process became more intricate due to structural changes, including some increased retentions. However, overall, specialty reinsurance and retro pricing experienced only slight moderation compared to the catastrophe market.

ALSO READ: ASEAN forms reinsurance committee to tackle climate risks

Japanese catastrophe excess of loss programs saw a high level of consistency in quotes, with reinsurers offering flat to very modest risk-adjusted rate increases, with few outliers.

The market now benefits from increased capacity driven by improved underlying combined ratios, lower natural catastrophe losses (despite heavy insured natural catastrophe losses industry-wide), and better investment income. 

This, combined with increased appetite, is expected to lead to more favourable terms and conditions for clients, despite ongoing challenges related to natural catastrophe exposure.

Overall, property and specialty buyers with access to increased capacity were able to secure improved terms and support in critical non-catastrophe areas.