By David Bull

April 25 - (The Insurer) - RenaissanceRe is eyeing opportunities at the mid-year catastrophe renewals amid increased demand and attractive rates and retentions, with CUO David Marra suggesting trading conditions are “more in favour of reinsurers” than at January 1.

The executive was speaking on the reinsurer’s earnings call on Thursday after it reported a first-quarter earnings miss after U.S. markets closed on Wednesday.

Marra said that the reinsurer has already bound lines on a number of mid-year renewals. As previously reported, there are a greater number of loss-affected accounts, including from the California wildfires and 2024 hurricanes, at the upcoming June 1 and July 1 renewals.

“Supply and demand are more in balance than in January 1 (renewals), and trading conditions are more favourable. The market remains attractive, and we have appetite to continue growing in property catastrophe, and we plan to deploy additional limit through mid-year,” said the executive.

Also on the call, RenRe president and CEO Kevin O’Donnell highlighted additional cat demand, mostly towards the top of programs.

He noted that as well as price increases of as much as 50%, the the reset in the cat market in 2023 also saw structural changes and higher retentions.

“What was happening before was an unsustainable chain of risk transfer to retro that was too low, reinsurers protecting income statements and primary companies now pushing through rate.

“What we have now is a much more stable … environment where the primary companies have pushed through rate (and) better reflected deductibles in the insurance product. Reinsurers have moved into balance sheet protection and retro has dropped out of the low aggregate coverage that reinsurers were buying,” he commented.

He said that there is no indication that the cat market is trending back to pre-2023 levels.

Marra added: “The rates and retentions are some of the most attractive we’ve seen, whether rates are up or down a bit, (we’re) less reliant on that. We’re confident that those trading conditions will continue.

“We have seen some renewals and we’re encouraged by the trading conditions. It is more in favour of reinsurers than it was at 1.1. Supply and demand are more in balance than what we saw at 1.1. There is growing demand, and we’ve been able to construct a really nice portfolio so far with the bulk of renewals yet to come.”

The executive added that more renewals are loss-affected going into the Florida renewal, where demand is growing and pricing is strong.

Additional demand is coming as more risk is moving back into the private market from Citizens Property Insurance Corporation, while the Florida Hurricane Catastrophe Fund is attaching higher, which increases demand for limit below it.

Marra also pointed to the positive impact on Florida claims from the legislative reforms of recent years.

VOLATILITY CREATES OPPORTUNITY

Earlier on the call, O’Donnell said that “unprecedented” uncertainty in the broader economic environment should create opportunity for companies such as RenaissanceRe.

“In an increasingly volatile world, our customers should want more of the protection that we provide and be willing to pay more for this protection. This is the type of environment where our business can thrive,” he said, describing the business the Bermudian engages in as “anti-correlated”.

He noted that while hurricanes and earthquakes do not correlate to financial cycles, there is the potential for elevated inflation that could increase the cost of rebuilding after large natural catastrophes – a factor that he said is built into RenRe’s property models.

“Regarding recession risk, we believe previous downturns are particularly instructive in demonstrating our immunity to business cycle disruptions.

“For the most part, insurance is a necessary or required purchase and by extension, demand for reinsurance will persist. In previous recessions, our reinsurance premiums were largely unaffected,” he said.

The executives also commented on the casualty marketplace. O’Donnell said the reinsurer is seeing elevated loss costs but that trend has been stable at 10% to 12%, with underlying rates on the quota shares it writes coming in “strong”.

“We're going to be slow in recognising the improvements that we're observing to make sure that those improvements are clearly demonstrated in the development patterns and the data. So I think when looking at the casualty market, it is a better market than we have been in,” said the RenRe CEO.

Marra added: “The casualty market is doing everything it should be to manage this part of the cycle … the market raised rate and reduced limit in 2019, and now there's another need to improve claims management. Companies are making solid investments in that.”