James Vickers, Chairman of International at Gallagher Re, reflects on the April 1 reinsurance renewals, noting that reinsurers were keen to expand their portfolios within the boundaries of their underwriting discipline.
Vickers highlights that one factor driving this growth is the closure of the 2023 year, which proved to be a successful underwriting period for reinsurers.
Moreover, Vickers notes that reinsurers now have a clearer understanding of their retrocession structures and capacity compared to the previous year. This clarity enables them to confidently navigate the market and manage their risks effectively.
Transitioning to property reinsurance, Vickers observes that pricing varies depending on the territory, with most territories experiencing significant rate increases. In Japan, for example, demand remained relatively stable, leading to straightforward renewals with discussions centered around price adjustments.
Vickers Capacity Expectations
Looking ahead to the mid-year renewals, Vickers expects to see a market with ample capacity, both in traditional and ILS markets. However, he questions whether reinsurers will prioritize meeting internal budgets over maintaining underwriting standards. He explains, “What we saw at 1/1 is some reinsurers probably didn’t hit their premium volume targets.
Vickers emphasizes the importance of underwriters justifying their decisions to senior management, especially regarding rate reductions. He notes that there needs to be a well-articulated argument around changed views of risk to justify any rate reductions.
Lastly, Vickers anticipates continued increased demand and availability of capacity in the mid-year renewals. He points out that inflation increasing underlying values and organic portfolio growth will drive demand, but he believes the traditional and ILS markets will be able to handle it comfortably.
Continued Demand and Capacity Expectations
Vickers emphasizes that the trend of increased demand and available capacity seen in the April renewals is likely to persist in the mid-year renewals. He points out that the market had sufficient capacity at both the January and April renewals, and he anticipates continued growth in demand due to factors like inflation and organic portfolio expansion.
He concludes, “I don’t see any abating of demand and I think the traditional market and the ILS market between them will be able to cope with that quite comfortably.”
In summary, Vickers’ insights shed light on the state of the reinsurance market post-April renewals, highlighting reinsurers’ confidence in their retrocession structures and capacity. Despite challenges such as increasing property cat pricing, the market remains resilient, with ample capacity and a focus on maintaining underwriting discipline while meeting internal targets.
