The Insurer TV’s Year in Review: A “generational hard market”
The end of the year is fast approaching, and with it, a time for reflection. And who better to reflect with than The Insurer’s editorial team?
The team has been working tirelessly throughout 2023 to bring you breaking news, exclusive content and in-depth analysis. We’ve already begun pulling together a summary of some of the major stories and themes that have been dominating our headlines this year, but we decided to dig a little deeper into some of these in a series of interviews with our esteemed reporters in the US and UK.
In the first installment of our end of year three-parter, we take a look at the drivers behind the “generational hard market” and associated dynamics, and the reasons behind the launch of several new reinsurance brokers.
The industry will remember 2023 as yet another $100bn-plus year for cat losses, which in turn led to further pressure on (re)insurers, driving up rate, raising retentions and triggering more retrenchment from certain parts of the market.
But 2023 stands apart from other years for the type of losses incurred.
“Where this year was different was we didn't see one major loss event such as in 2022 when Hurricane Ian cost around $50bn,” said The Insurer’s managing news editor Scott Vincent.
“Instead, we saw lots of small million-dollar loss events which as an aggregate impact, added up to $100bn. But there was no one sort of major driving event across the year.”
Instead, underwriting losses were pushed up by the elevated frequency and severity of cat event losses, fuelled by more active hurricane seasons and a rise in secondary perils. By many accounts, the industry had tolerated these losses for far too long, though that streak came to an abrupt halt 12 months ago, when the hardening began in earnest.
“The year was marked by dramatic increases in rates along with a significant raising of retentions,” said The Insurer’s North American editor David Bull.
The year saw a shift in the dynamics between the insurance and reinsurance market. And Bull expects the onward march in retentions is likely here to stay.
“If you talk to reinsurers, I think also insurers, there's a recognition that this is probably more of a permanent thing – reinsurers are not going to go back to lower retentions just where they were two years ago, and then have the same issues around frequency and severity of loss.”
Bull anticipates that the chaotic renewal period of 1.1.2023 will likely shift to one of stability during the upcoming renewals. There are also some reasons to expect pockets of opportunity.
Take for instance the retrenchment from some personal lines carriers in parts of the US, like California and Florida, for myriad reasons throughout 2023.
“There's been an opportunity created in the U.S. market within both California and Florida as a result of those pullbacks from the admitted carriers in the state,” said The Insurer’s North American associate editor Chris Munro.
Another growth area that opened up this past year was in the reinsurance broking space, which is experiencing an influx of new entities entering the market. The ingress is happening across numerous parts of the industry distribution chain.
“You've got more brokers who are looking to capture or retain a premium in house and to minimise what a lot of people call ‘leakage’,” said The Insurer’s head of Americas news content, James Thaler.
“Especially in a hard market, you're going to have buyers who are frustrated with the renewal outcomes and they're frustrated that they're not getting the attention they feel they deserve. And they're going to give some of these startups a shot,” said Thaler.
Be sure to watch parts 2 and 3 of our Year in Review series, coming up later this week.
Watch this 17-minute video to find out more about:
- What made 2023 stand out from prior $100bn loss years
- Why this was the year dynamics shifted between insurers and reinsurers
- Why the onward march in retentions will likely stick around in 2024
- Where retrenchments brought opportunity in 2023
- Why the broking reinsurance space is undergoing a rebellion