The reinsurance market: Gallagher REPORT

Despite economic challenges on reinsurers and cedants, virtually all purchasers secured coverage on July 1. Attachment levels and the cost of ceding risk were greater than most purchasers desired, and supply limits led to tensions not seen in years. Gallagher Re's recent 1st View renewals report shows the reinsurance market's firming trend.

Inflation and rising interest rates have led reinsurers to modify their balance sheets and reserves, while recognizing how a recession may increase claims frequency.

Along with stable loss levels, these economic drivers enabled reinsurers to continue upward price pressure to limit volatility.

Gallagher Re's study also found:

Reinsurers moved away from low-level strata, differentiated by nation and area, reducing natural disaster capacity.

Reinsurers assessed cedants' inflation responses and applied carefully calculated loadings to pertinent treaties.

Russia's invasion of Ukraine raised cyber and war contract concerns.

Long tail casualty placements were attractive with reinsurers, although ceding commissions were a hot topic.

Higher ILS risk transfer prices have attracted additional money, but not market softening.

Gallagher Re's worldwide CEO, James Kent, said reinsurers are more vulnerable to losses and external catastrophes since 2008. Reinsurers are prepared to criticize cedants' model results in inflation debates. Most reinsurers are examining reserve sufficiency when interest rates increase, along with primary rate adequacy.

They're being hit on the asset and liability sides simultaneously, which fuels their drive to keep the price movement of the previous two years going.

Kent said that in classes and areas with limited capacity, economic factors outweighed technical price.

“Relationships are extremely essential, and competition – albeit subdued – is still present,” he said, adding that reinsurance purchasers could get “most of the coverage they needed, if not at the cost they hoped for.”