GC: Moderate rate reductions likely at 1.1 but program structure changes will endure

A continuation of moderate risk-adjusted rate reductions for more risk-remote cat layers is expected at 1.1, while casualty renewal negotiations are expected to continue to focus on underlying rate conditions and portfolio performance, Guy Carpenter has said.

Speaking during a media briefing ahead of the start of the annual Rendez-Vous in Monte Carlo at the weekend, the reinsurance broker’s president for global clients, David Duffy, said the property market in 2025 will continue to be guided by the trends observed so far in 2024.

“After a historic reset in pricing, program retentions, and coverage in 2023, 2024 has been characterised by a more orderly trading environment,” he said.

However, he said property reinsurance pricing – both for cat and non-cat lines – will likely continue to be sensitive to specific client and regional loss experience.

For the year-to-date, he said global demand for catastrophe reinsurance limit has grown by approximately 10 percent.

Guy Carpenter’s US property catastrophe rate-on-line (RoL) index increased by 1.2 percent in H1 2024, down markedly from January.

GC’s chairman David Priebe said reinsurance risk appetites had continued to improve during the first half of the year, with underwriting discipline remaining strong.

“This current trading cycle is marked by engaged stakeholders actively coming to the table providing critical capital and financial support to the economy,” he said.

Priebe said the market recalibration which saw a major shift in attachment points at the start of last year was likely to endure.

“In 2023, substantial and – for the most part – broad, sweeping market corrections were made, including the redesign of many program structures and the reset of pricing, whereas 2024 has been all about the details,” he said.

“Pricing is likely to perpetually recalibrate. However, program restructuring is likely to endure, particularly with regard to attachment points. It makes sense that the reinsurance offering continues to evolve in order to coincide with the ever-changing nature of risk.”

“At the spring renewals we found risk appetite continuing to improve, with underwriting discipline remaining,” he outlined.

“At mid-year, the reinsurance market transitioned into a rhythm where appetite was meeting demand in a dynamic trading environment. Successfully differentiated cedants secured further term concurrencies and pricing considerations, while property business was now being sought by markets.”

GC’s president and CEO Dean Klisura said reinsurers will maintain underwriting rigour at the upcoming 1.1 treaty renewals.

“The market has ample capacity and reinsurers are motivated to engage with cedents. Our clients are seeking to differentiate themselves in this marketplace and leverage key strategic trading relationships,” said Klisura.

Long-tail capacity to be “adequate”

“I think reinsurance markets are really bringing a detailed and disciplined underwriting approach to each differentiated renewal at January 1. But keep in mind, despite lots of written concerns and discussions about US casualty, many of our reinsurers are open and motivated for business at 1.1, they want to grow their portfolios.”

Meanwhile, Guy Carpenter’s newly appointed global head of distribution and market relations Jennifer Paretchan suggested capacity is expected to be “adequate” for long-tail lines.

“But there will likely be scrutiny across various sublines, particularly those without positive underlying rate changes.

“Reinsurance terms and conditions will reflect how carriers managed their portfolios over the market cycles, actual versus expected loss development, and the impact of any underwriting pricing adjustment,” she commented.

The executive added that varied outcomes are expected, particularly in certain sub-lines.

“However, reinsurers remain committed to the casualty market and will continue to deploy capacity, particularly for strategic partners,” she concluded.