Reinsurance likely to face ‘cyclical and structural change’ in 2024: Howden

In other aspects, supply has met the demand for insurance products – a shift from recent market volatility.

Cautious optimism with modest economic growth is expected this new year, said insurance group Howden. However, there are significant potential headwinds, including inflation volatility, climate change, geopolitical tensions, and technological advancements. These factors underscore the crucial role of (re)insurance in managing emerging risks, according to Howden’s renewal report.

The report indicates that the (re)insurance market has entered a phase of relative stability, following a period of significant realignment. This is a positive development, suggesting a more predictable and manageable environment for insurers, reinsurers, and policyholders.

Improved supply dynamics have contributed to this stability. There's now a sufficient supply to meet the demand for insurance products, which is a shift from previous periods of tightness or volatility in the market.

Despite overall stability, the market is experiencing nuanced conditions due to macroeconomic and geopolitical factors, as well as adjusted loss expectations. This complexity requires careful navigation and bespoke solutions.

The renewals at the beginning of 2024 were stable and orderly, characterized by sufficient supply and disciplined underwriting. This suggests a healthier market that can adequately absorb risks.

The retrocession market, which is essentially insurance for reinsurers, has also seen stability. This is partly due to the absence of major losses in 2023 and favourable developments from previous major events like Hurricane Ian.

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There's a modest increase in global property-catastrophe reinsurance rates. The report highlights an elevated baseline for loss expectations, reflecting the high cost of natural disasters in recent years.

Different regions have experienced varying rates and conditions based on their specific loss experiences and market dynamics. For example, European renewals were shaped by loss experience and inflation, while U.S. renewals reflected improved supply dynamics.

The casualty reinsurance market shows sufficient capacity and market discipline. Rates remain stable, with variations driven more by individual account performance rather than overarching market trends.

There's a noted increase in dedicated capital, and capital inflows are expected to continue in 2024. The reinsurance sector remains attractive to capital providers, especially given the need for returns on invested capital to exceed the rising costs of capital.