Reinsurers gain confidence with improved loss ratios

Some exceeded a 20% return on equity (ROE) in the first quarter.

Reinsurance buyers found a more favourable market as of  1 July, following near-record returns for reinsurers in 2023, some exceeding 20% return on equity (ROE), Gallagher Re noted. 

The trend continued into the first quarter (Q1 2024) of the year, with a notable 12% improvement in combined loss ratios, bolstering reinsurers' capital and confidence. 

Nonlife insurance-linked securities (ILS) capital also reached unprecedented levels due to heightened investor interest, enhancing market capacity.

In the property sector, improved pricing and sufficient capacity met demand, including an additional $3b to $5b for Florida. 

Predictions of an active 2024 North Atlantic Hurricane season minimally impacted pricing and capacity among traditional reinsurers, whilst some ILS and retrocession providers moderated their appetite for US and Caribbean Catastrophe risks.

Casualty insurers expressed less confidence compared to their property counterparts, particularly in the US, amidst concerns over rate adequacy exacerbated by adverse developments reported in Q4 2023. 

However, successful placements were achieved through effective communication of underwriting and pricing strategies.

In specialty lines, reinsurers maintained disciplined underwriting practices, ensuring ample capacity for well-priced and structured programs, with the exception of UNL retrocession.