Expectations converge on broadly flat 1.1 renewals as conference season closes

Industry sentiment continues to point towards broadly flat property catastrophe reinsurance renewals as this year’s international conference season concludes in Singapore today, with recent reinsurer gains on terms and conditions likely to be maintained at 1.1.

A series of loss events since this year’s conference season began in early September – most notably hurricanes Helene and Milton in the US – has likely ended the prospect of any significant softening, according to the majority of industry players canvassed by The Insurer over recent months.

Addressing this week’s Singapore International Reinsurance Conference, JMP analyst Matthew Carletti said: “Discussions in Monte Carlo were about how much the price will come off. But that changed very quickly.”

Carletti said most conversations now suggested renewals ranging from flat to modest reductions of 5 to 10 percent. “Terms and conditions will be much stickier,” he said.

He added that the outlook for the reinsurance sector was now strong.

“I spend most of my day talking to investors and they are very optimistic about the sector,” he said.

“It has been an interesting cycle turn. In most cycle turns in the past there has been a hole in the balance sheet that needs to be replaced. That wasn’t the case this time – reinsurers were just tired of not making money.

“Investors look at this cycle and say this has a good feel to it. By and large, reinsurers have got out of the business of insuring earnings for insurance companies; they reinsure balance sheets but less so for keeping volatility out of earnings.”

Achim Kassow, Munich Re’s board member responsible for Asia Pacific, said the reinsurance market has now achieved a “sensible balance”.

“On the supply side, I am confident capacity will not become a problem at 1.1 as long as rates and terms and conditions remain adequate,” he said.

“On the demand side, we see primary insurers seeking more protection against the volatility coming from all different drivers of risk. Volatility and business growth in the primary market are key drivers for an increasing demand for reinsurance protection.

“The sentiment for upcoming renewal is that it will be quite orderly. Given the losses we have seen, I would expect current market conditions to continue.”