GC’s Boyce: “Coverage value as important as price” at 1.1 renewals

As the reinsurance renewal period begins, buyers expect to secure cover at rates more commensurate with their risk profile and which reflect the improved performance of the underlying portfolios, according to Guy Carpenter’s managing director, Global Specialties, James Boyce.

With the launch of the reinsurance broker’s global specialty market update, Boyce said cedants will “demand more consistency in wording, improvements in terms and conditions and more flexibility in terms of attachment points” during renewal talks.

“The value of the cover will be as important as the price,” he said.

Boyce said the global specialist reinsurance market was now in a period of “relative stability” following the recent “market turmoil”.

He said that with strong rating adequacy achieved in many lines of business, capacity is available to meet demand outside of a few challenged areas. Boyce noted that there is increasing consistency in the coverage available.

“Reinsurers have generally performed strongly in the specialty sector and the market continues to offer opportunities,” Boyce said.

However, Boyce said much of the turmoil in recent years has resulted from predicted losses that have yet to materialize.

“While the sector has experienced some sizeable events, we haven’t seen the catastrophic financial impacts – which have underpinned a large proportion of the rate increases – coming through to the market,” he said.

Boyce said the data “will be critical to achieving a strategic alignment” between the requirements of Guy Carpenter’s customers and reinsurers on January 1.

Non-marine retro demand has increased

The market update published this morning highlighted that the second quarter of 2024 saw a significant increase in demand for peak risk and direct and optional (D&F) limit retro hedging.

Demand for XoL retro cover increased following the April 1 renewals, driven by appetite from January 1 buyers for the peak risk retro top up limit and new buyers looking to re-enter the market, the GC said.

Subprime coverage remains a fairly narrow market, but brokers are keen to bring more reinsurers back into that space.

The broker said that the results in the share price were strong, so more markets are willing to implement the capacity on a share price. However, in the retro space, there is still more demand than supply for quota capacity.

Overall, the GC said the biggest issue ahead of the renewals is what happens during the rest of the North Atlantic hurricane season. There is currently enough capital in the market to meet demand, but more is likely to unfold, which will affect overall cost and supply dynamics.

“Clients buying a significant amount of capacity should evaluate as many capital pools as possible – traditional reinsurers, ILS for occurrence and aggregate reinsurers as well as quotas and cat bonds or look at indexed products,” John Fletcher , CEO, Bermuda said.