Strong returns to persist for reinsurers amid T&C changes: JMP

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Analysts at JMP Securities report that while the property catastrophe reinsurance market is attracting more capital, recent significant changes in terms and conditions are expected to sustain strong returns despite anticipated minor price reductions.

The firm highlights that the 2023 property reinsurance renewal experienced the most substantial shifts in pricing and terms in over a decade. While prices notably increased, more importantly, attachments rose significantly, and other critical terms and conditions also tightened.

Analysts observe that a year later, “those changes have proved to be incredibly valuable for reinsurers.”

Despite facing over $100 billion in catastrophe losses, the industry has achieved robust returns. This success is attributed to the majority of losses remaining at the primary level due to increased attachments.

This has reinforced reinsurers’ commitment to maintaining these changes, resulting in minimal concessions during this year’s renewals.

While pricing for January 1 remained steady or slightly increased, there were some minor price concessions during the April 1 renewal in Japan. Similar adjustments are anticipated at the upcoming June 1 renewal focused on Florida, as more capital enters the market.

However, these minor price shifts are not expected to significantly impact reinsurance profitability. The restructuring implemented last year remains in place and is seen as the primary factor driving improved profitability.

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