GC’s Priebe: 1.1 property pricing up 40-60% in N America, 25-35% in Europe/UK

Reinsurers pushed up property pricing at 1.1 significantly more for North American cedants than their European counterparts with attachment points a big focus during the renewals, leading some buyers to shift capacity not purchased from the bottom to the top end of programs.

Speaking to The Insurer TV, Guy Carpenter’s chairman David Priebe said property was the most challenged sector at 1.1, driven by imbalance of supply and demand.

Guy Carpenter has previously suggested that market conditions warranted a correction, but not all outcomes at 1.1 were logical or sustainable.

“We agree a lot of conditions warranted a micro-correction but not all of the outcomes, or at least all of the requests, were logical or sustainable,” said Priebe.

Some reinsurers reduced or withdrew their property capacity in 2022, but others are now viewing this market inflection point as an opportunity to increase their participation and future outcomes should stabilize as capacity deficiencies moderate.

“Reinsurers focused on three distinct areas: pricing, attachment points and coverage, and all three of these saw adjustments,” said Priebe.

The executive reported that pricing and attachment points increased globally. He said risk-adjusted pricing was up on average 40-60 percent in North America and 25-35 percent in UK/Europe, which are the two largest property markets at 1.1.

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Priebe commented that the “market resolve in Europe was stronger than originally anticipated”.

In the Asia-Pacific region, pricing increased on average 20-50 percent, with China and Australia driving the top end of those increases. EMEA averaged low double digit rate increases and the Caribbean was “a little bit more aligned with what we saw in North America”, Priebe added.

The executive noted that these figures are after taking into account increases for inflation and exposure growth, and so represent real movement across the market.

Priebe said that attachment points were a focal point for a lot of reinsurers because of the long time since they had been adjusted and the recent large increases in valuations.

“Those factors put significant strain on the bottom of the programs and after years of loss activities,” Priebe said.

In North America, 75 percent of Guy Carpenter’s programs saw attachments increase, with an average increase of 30-40 percent.

Priebe reported that, as a result of attachment points moving up, some buyers shifted capacity not purchased from the bottom to the top end of the programs.

“More importantly, most insurers had already bought robust coverage in prior years so when pricing was available and capacity was both available and attractive, this allowed them to absorb increased exposure without falling outside of their risk tolerance metrics,” Priebe said.

In addition, the executive said: “As pricing and coverage moved, many buyers didn't have the desire and/or the ability to buy more when the cost-benefit trade-off was assessed. So the major demand that was expected early in the renewal process didn't materialize.

“So there was sufficient supply to meet demand at 1.1, and we expect it will still be there as we move through the year.”

Casualty lines see less hardening

Aside from property, Guy Carpenter has previously reported that for casualty lines, treaty results were highly dependent on prior-year results, underlying rate changes, and overall portfolio performance, with pressure on pricing seen across most lines.

The reinsurance broker said that overall, once market-clearing pricing was determined, capacity was stable across most casualty lines with very little change in terms/conditions.

Priebe told The Insurer TV that casualty and the professional liabilities renewals didn't experience the same degree of hardening as seen in property. But there was still pricing pressure.

“In terms of the casualty excess loss, reinsurance rates were also under pressure with increases based really on historical performance and adverse developments. But overall once we established those firm order terms, there was ample capacity to fill most orders and terms and their conditions remained largely unchanged.”

Watch the 17-minute interview with Guy Carpenter’s chairman David Priebe for further intel on the dynamics at the 1.1 renewal, including:

  • Key areas of focus for reinsurers at the 1.1 renewal
  • How the renewal for lines outside of property played out
  • Where risk-adjusted rate increases landed for NA, Europe and Asia
  • Impact of growing risks such as inflation, climate and geo political turmoil in 2023