Greater optimism on global property renewals

Companies with excellent loss experience should feel a lot more optimistic going into their 2024 property insurance renewals, according to Gallagher Specialty’s Global Property Insurance Market Update Q1 2024.

It says the treaty reinsurance market at the 1 January renewal was far more orderly than in the prior year, encouraged by a benign 2023 US hurricane season and the prospect of much improved annual underwriting results for both insurers and reinsurers.

This is despite global cat insured property losses likely to exceed $100bn in 2023, with this amount being largely driven by severe convective storm losses in the US, which are currently estimated to be totalling around $60bn.

Gallagher Specialty says in the update that it shares in its clients’ “frustrations at having been impacted by year-on-year compound rate increases for six years”. But it notes: “In recent weeks, there have been some encouraging signs from London property insurers, with many advising that they have increased capacity for 2024, both in terms of overall aggregate and, in a number of instances, increased line size for 2024 renewals.”

It says some of the additional capacity will also come from internal carrier capacity redeployment from less profitable lines of business or where they have closed down their trading divisions, as has been the case in a few instances where syndicates are no longer trading in treaty reinsurance. Galagher concludes: “Initial indicators are that with inflation easing, property valuation increases will be moderated for 2024 renewals.”

For the US, Gallagher says that the supply side of the equation is certainly improving for insureds, but it does not expect carriers in the direct and facultative space to give up hard-fought gains in rates, terms/conditions and deductibles easily. However, it adds that insureds can take solace in the fact that the extreme rating uplifts of the last six years are losing momentum. “Brokers will clearly have access to additional capacity in 2024 to leverage better outcomes for buyers, who could be forgiven for feeling the hardening phase would never end,” says Gallagher.

For Asia, Gallagher notes that many countries now operate with mature domestic markets that all have their own nuances and treaty renewals. In Japan, it says it is still a little early to judge if the recent earthquake in the Noto peninsula will have any lasting effect on terms and conditions for the insurance market domestically, and affect appetites and rates for earthquakes for risks that require international capacity. However, commercial/corporate losses appear to be limited.

In Taiwan, rate increases have slowed at year-end but were not eliminated, and where policies achieved low single-digit renewals it was invariably due to changes in policy terms and conditions. In Indonesia, pricing has been extremely volatile, with high double-digit rate increases in the range of +10% to 20% for risks that require offshore capacity, the update states.

In Korea, Gallagher says that where business is not group controlled, significant competition exists between domestic insurers seeking market share, and this has led to the polarisation deepening between risks domestically absorbed and those requiring international capacity. In the Philippines, commercial property in the domestic market is still enjoying rates that remain below the technical rates needed by international carriers.

Finally, Gallagher Specialty says it has seen a greater focus and interest in ART products, including retained risk-financing programmes, parametric solutions, and loss portfolio transfers. “The use of ART products has enabled risk managers/CFOs to alleviate some of the pricing pressures, deductible increases, and restrictions of coverage being imposed, as well as remove volatility to their balance sheets, take more control in the primary space of their programmes, and build for the future,” says the broker.