Howden Re has observed a moderation in pricing within the property-catastrophe reinsurance market following the rate increases of 2022 and 2023.
The average risk-adjusted property-catastrophe reinsurance rates-on-line are now 5% lower than usual, typically ranging from -7.5% to -2.5%, according to their report.
This period of adjustment in the reinsurance market is partly due to a resurgence of dedicated sector capital surpassing 2021 levels, along with strong inflows into Insurance-Linked Securities (ILS). This has increased capacity at the top of reinsurance programs, resulting in risk-adjusted rate reductions in the higher layers.
“Our focus remains on providing innovative thinking alongside dynamic placement strategies to meet these challenges head-on,” he added.
The report also highlighted increased activity and competition in the ILS market. Larger carriers in Florida have been more active in issuing catastrophe bonds, increasing supply in higher layers and leading to significant growth in assets under management for capital providers.
A shift in focus towards property risks by some reinsurers followed strong performance in 2023, with several reporting some of their best financial results in decades in terms of combined ratio, return on equity, and economic value added.
This growing interest in ILS reflects a broader market trend towards diversified alternative risk transfer mechanisms, offering reinsurers and cedents more options for managing their exposures.
However, factors such as the 2024 hurricane season could exert short-term pressure on the market. The weakening El Niño and increased likelihood of La Niña could lead to stronger storms, highlighting the market’s inherent volatility and the need for more strategic resilience.
Howden Re is the reinsurance and strategic advisory arm of Howden.
