Reinsurance pricing seen flat to slightly up at Jan 2024 renewals: JMP Securities

Analysts at JMP Securities say they are expecting reinsurance pricing will be flat to slightly up at the January 2024 renewal season, with reinsurers expected to push for rate to keep pace with inflationary costs, but a chance that some appetite returns for lower-layers if the price is right.

Flat pricing at the reinsurance renewal could be viewed as a victory, is the sentiment the analysts are hearing from brokers, while on the reinsurer side, they “will be quick to note they care more about terms and conditions than pricing, within reason,” the analysts believe.

“In broad strokes, all sides appear to be in relative agreeance on the likely outcome,” the JMP Securities equity analyst team said in a new report.

Cedents and brokers are acknowledging that it will be a challenge to get rates down, with flat seen as the best target.

“We expect particular focus around increased top-layer protection as cedants react to inflation, as well as an upcoming new RMS Atlantic hurricane model,” the analysts state, which could have some bearing on the insurance-linked securities (ILS) community, especially catastrophe bonds, where the ILS market would be ready to help absorb any additional top-layer demand that emerges.

“While reinsurers historically picked up the tab in Monte Carlo, this year insurers were highlighting just how much they need their reinsurance partners and are trying to remain in their good graces,” the analysts said.

Secondary perils are set to remain in strong focus at the January 2024 reinsurance renewals, the analysts believe, with reinsurers buoyed by the results they are experiencing, as they avoid many of the frequency type losses thanks to higher attachments and improved terms.

“Which with increased retentions and an absence of aggregate covers means primary insurers were left retaining the majority of the losses,” JMP Securities analysts note.

The analysts heard “little-to-no appetite from reinsurers to reverse course” on this in their discussions in Monte Carlo this year.

“Most said they plan to hold a firm line, while some plan to push for further increases, and a small number suggested they might be willing to return to lower down exposures, but only on a case-by- case basis and that the price must be right,” the analysts continued.

Adding that, “Appetite for aggregate covers seemed similarly weak, although some may be willing to revisit the structures for the right price/terms.”

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