Published on 02 November 2023
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US Property Market Update Q4 2023
Published on 02 November 2023
The Property insurance market in 2023 has been very challenging for clients with many receiving their sixth consecutive renewal rate increases.
The 1.1.23 and subsequent month’s treaty reinsurance renewals significantly impacted all insurers whom operate across all territories globally with those insurers having to endure significant rate increases, and their premiums compounded further with exposures increasing due to valuation/inflation challenges. Notwithstanding this, they have also had to absorb increased retentions and more limited overall coverage. This was all as a consequence of many years of unprofitable returns.
In basic terms, the costs of capital has increased throughout the chain and the insurers have had to pass on those costs to their clients in order to be able to continue in providing the level of coverage which our mutual client(s) require.
Climate change and more frequent and severe weather events continues to be a discussion point and during H1, global insured cat half-year losses passed USD 50bn for the first time. However, despite this, we saw Lloyds posting a positive H1 result, the magnitude of which, we have not seen since 2007. All eyes will be on both Lloyd’s and other major insurers as to where the full year results end up at. The major question that we are being asked for 2024 is not surprisingly, what should clients be expecting in 2024?
Well, to provide some early perspective, it is felt that it will require a relatively benign 2nd half of 2023 in terms of property cat losses in order to produce a very positive underwriting result and thereby demonstrate to capital that the market does know how to underwrite property profitably during this prolonged period of increased weather activity and also taking into account the impact of inflationary pressures being prevalent whether that is in terms of higher replacement cost valuations, and therefore passing on these increased exposures to reinsurers when purchasing treaty covers’ with further upwards pressures on both retention and pricing.
If we see capital have the confidence in returning to the property marketplace, will there be significant amounts available to positively impact pricing the marketplace? Will insurers be further impacted by treaty reinsurance renewal increases at 1.1.24 in the individual marketplaces (and in those subsequent months)
These questions will be very much dependent on how the balance of the year performs from both a North Atlantic hurricane and a wildfire perspective and furthermore where looking outside of the US, how individual marketplaces have performed. Not all is clear at this stage but there is a recognition that client affordability, as always, is a factor at the present time and clients will want to take a look at how we can assist in providing them with creative renewal solutions whether that is in the traditional sense or by way of introducing alternative risk transfer mechanisms such as parametrics and retention risk financing products.
The early indicators in respect of 2024 is that London insurers will be looking to expand their property appetite in terms of capacity and aggregate deployed which is welcome news in this current climate.
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Dan York
Dan joined Alesco London in 2003 after graduating from the University of Southampton.
He is an Account Executive to some of Alesco’s major national and global insurance accounts and is responsible for the placement and servicing of their property insurance into the London, European and Bermuda insurance markets.
Dan's main specialty is on clients with locations in major critical catastrophe exposed areas and perceived high risk. This involves a number of accounts with significant wind and earthquake exposure, primarily in Florida, California, Texas, the Carolinas and the Gulf coast.
