This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred. Tokio Marine Holdings, Inc., through its subsidiary Tokio Marine & Nichido Fire Insurance Co. Ltd., has become the first Japanese insurer to make use of a SOFR-based World […]
Industry Loss WarrantyThis content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred. After Florida Governor Ron DeSantis claimed on television that the states Citizens Property Insurance Corporation “is not solvent”, the CEO of the insurer of last resort has responded […]
Industry Loss WarrantyThis content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred. Rating agency AM Best has explained that the expansion of named peril lists on reinsurance and retrocession arrangements at the January 2024 renewals, is not expected to make […]
Industry Loss WarrantyThis content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred. Tokio Marine Holdings, Inc., through its subsidiary Tokio Marine & Nichido Fire Insurance Co. Ltd., has become the first Japanese insurer to make use of a SOFR-based World […]
Industry Loss WarrantyThis content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.
Tokio Marine Holdings, Inc., through its subsidiary Tokio Marine & Nichido Fire Insurance Co. Ltd., has become the first Japanese insurer to make use of a SOFR-based World Bank Sustainable Development Bond as a permitted investment within its latest catastrophe bond issuance, the company highlighted today.
As Artemis has been reporting, Tokio Marine has been in the market since February and has now secured its targeted $100 million Kizuna Re III Pte. Ltd. (Series 2024-1) catastrophe bond recently, with the reinsurance coverage from the transaction priced at the low-end of initial guidance.
Now, the Japanese insurer has highlighted its use of the proceeds of the catastrophe bond issuance to purchase a sustainable development bond, saying that using this “as collateral for the Kizuna Re III cat bond is supporting the achievement of sustainable development goals and contributing to the realization of a sustainable society.”
Use of proceeds of cat bond issues to invest into financing for sustainable development helps sponsors align their catastrophe bond issues with their own environmental, social and governance (ESG) agendas, while also making the investment more appealing to investors with an ESG focus or mandate.
Tokio Marine used the proceeds of the Kizuna Re III 2024-1 catastrophe bond, that provides it with earthquake reinsurance and was issued out of Singapore, to purchase a SOFR-based Sustainable Development Bond issued by the World Bank Group’s International Bank for Reconstruction and Development (IBRD).
The company said that, through its sustainability strategy, it aims to “solve social issues through business activities and contribute to the realizations of a sustainable society” as a medium- to long-term growth engine and is accelerating its efforts to take climate action, improve disaster resilience, and protect the natural environment.”
The company said that, as part of its goal to improve disaster resilience in what is one of the most disaster-prone countries in the world, Tokio Marine has been a regular user of catastrophe bonds, alongside purchasing traditional reinsurance capacity.
“As a part of these strategies, besides sponsoring the issuance of the Kizuna Re III cat bond, TMNF has elected to invest the proceeds from the sale of the Kizuna Re III cat bond in a SDB issued by IBRD (rather than money-market funds), which is the first example of a Japanese insurer doing so since IBRD notes transitioned from LIBOR to SOFR,” the company explained.
Adding that, “The principal amount of this catastrophe bond raised from qualified institutional investors will be invested in a SDB issued by IBRD under its Global Debt Issuance Facility. The net proceeds of the SDB will be used by IBRD to fund projects, programs, and activities in IBRD’s member countries designed to achieve positive social and environmental impacts and outcomes.”
It’s encouraging to see the use of sustainable development bonds as collateral investments in the catastrophe bond market expanding further beyond just the World Bank, to private insurance sector cat bond sponsors.
The World Bank itself was the first to do so this, since when insurance giant Assicurazioni Generali S.p.A. developed its framework for Green insurance-linked securities (ILS) which saw the proceeds of one of its catastrophe bonds used to refinance a green asset in an effort to help avoid greenhouse gas emissions.
But, Tokio Marine is the first private insurance or reinsurance market sponsor of a catastrophe bond to use a puttable SOFR linked Sustainable Development Bond from the IBRD, which marks an efficient way to structure a cat bond with collateral that can be put to work in supporting sustainable or ESG driven goals.
As a reminder, Gallagher Securities, the insurance-linked securities (ILS) specialist arm of reinsurance broker Gallagher Re was the sole structuring agent for this new cat bond for Tokio Marine, so will have been instrumental in incorporating the sustainable development bond as permitted investments for the collateral, within the overall cat bond structure for this issuance.
You can read all about this new Kizuna Re III Pte. Ltd. (Series 2024-1) catastrophe bond transaction and every other Tokio Marine sponsored cat bond in our Artemis Deal Directory.
Tokio Marine is first Japanese cat bond sponsor to use sustainable development bond was published by: www.Artemis.bm
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This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred. After Florida Governor Ron DeSantis claimed on television that the states Citizens Property Insurance Corporation “is not solvent”, the CEO of the insurer of last resort has responded […]
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After Florida Governor Ron DeSantis claimed on television that the states Citizens Property Insurance Corporation “is not solvent”, the CEO of the insurer of last resort has responded saying that Florida Citizens financial structure means it “will always be able to pay claims”.
The number of policies in-force at Florida Citizens has dipped to around 1.17 million at the end of February, down from a high of just over 1.4 million last year.
That decline is thanks to depopulation activity, as private insurers take out some of its risk, but the state wind insurer of last resort has not seen its exposure decline especially, given the inflationary effects of the last year or so.
The financial adequacy of the Florida Citizens business model has come in for questioning of late, with US Senate Budget Committee Chairman Sheldon Whitehouse questioning the ability of Citizens to pay its claims without taxpayer support.
Which has led to a back and forth in letters between the Senator and Citizens CEO Tim Cerio, who has responded again to say that he believes Citizens has the ability to “always pay claims.”
“We believe we fully addressed the concerns raised in Chairman Whitehouse’s prior letter by pointing out in great detail the mechanisms under Florida law that ensure Citizens will always be able to pay the claims of its insureds. We also highlighted that neither Citizens, its predecessor entities, nor the State of Florida, have ever sought a federal bailout to cover hurricane losses. We also expressed concern that the Chairman’s letter could cause misplaced panic in a Florida insurance market well on its way to recovery,” Cerio explained.
Adding, “We will certainly meet with Budget Committee staff to provide information and documentation about Citizens’ structure, function, and claims paying ability. It is important to note that much of the information sought by the Budget Committee is already available online and is regularly discussed during our public board meetings.”
Cerio went on to explain, “It is also important to reiterate to Floridians in general, and Citizens policyholders in particular, that Citizens’ financial structure ensures that it will always be able to pay claims.”
He further said that, “we can think of no scenario in which Citizens would be required to seek federal financial assistance.”
Cerio said that should Citizens exhaust its surplus and extensive reinsurance coverage after a major hurricane or series of storms, it would be required under the Florida statutes to “levy surcharges on its policyholders and assessments on non-Citizens policyholders to eliminate any deficit.”
Cerio further said, “This is not mere speculation. Following the 2004-2005 hurricane seasons, Citizens successfully used this assessment mechanism to eliminate a deficit without federal assistance and with minimal impact on Florida insurance consumers.”
The Florida Citizens CEO then made a commitment to secure the necessary reinsurance and risk transfer for the coming hurricane season.
He stated that, “Going into the 2024 hurricane season, Citizens will have the reserves and reinsurance coverage to handle a 1-in-100-year storm without having to levy assessments on non-Citizens policyholders. To put that into context, Hurricane Andrew was a 1-in-43-year event while Hurricane Ivan was a 1-in-20 to 1-in-25-year hurricane.”
As we reported back in December 2023, Florida Citizens looks set to purchase even more reinsurance and catastrophe bond backed risk transfer in 2024, with its new layer structure, following the merging of its accounts, suggesting as much as $5.5 billion could be purchased this year.
Florida Citizens is expected to come back to market with catastrophe bonds in the coming month or so, with a large issuance of perhaps more than $1 billion anticipated, should the cat bond investor community be receptive.
At the same time, Citizens staff are already engaged with reinsurance and ILS markets to ensure it can secure the necessary reinsurance cover it needs from traditional and collateralized sources.
As we also reported back last December, Citizens will only have a $500 million Lightning Re Ltd. (Series 2023-1) industry loss trigger catastrophe bond left in-force, given it’s long-standing plans for an early redemption and other scheduled maturities of cat bonds, as it needs to buy afresh for the new combined tower reinsurance approach.
The cat bond and reinsurance market is expected to be receptive to Citizens needs, so it’s expected the insurer won’t be challenged to secure the necessary reinsurance it needs.
However, Citizens CEO Cerio did highlight once again the issue over whether the rates it is charging are sound in the first place.
Saying, “Although Citizens’ assessment authority means that it will always be able to pay claims, Citizens’ rates are currently actuarily unsound because of the “glide path.”
“It is critical that Citizens be able to charge actuarially sound rates to help minimize the risk of such assessments on the people of Florida.”
Meanwhile, Senator Whitehouse said Citizens has not addressed the concerns over its financial stability and claimed Citizens failed to cooperate with his investigation.
With reinsurance to cover a 1-in-100 year storm and the ability to levy assessments should that and whatever surplus is available be exhausted, it seems Citizens financial shape is no worse than it has been in the past and the reinsurance and cat bond market remains a critical source of risk financing.
As ever, risk commensurate pricing for inward policies remains key, as to does how that could also result in a much faster shift of policies back to the private marketplace, given private insurers would be more competitive then.
That could help to more rapidly reduce the exposure base of Citizens, so reducing the potential financial hit from major storms.
That, alongside measures to further increase the health of the Florida market seem the only reasonable way forwards, if the over-exposure of Citizens is seen as the problem.
Time would be well-spent on identifying how global insurance and reinsurance markets could better help, through the creation of capital structures to support more of Florida’s risk, if indeed reducing the chance of assessments and potential taxpayer levies is the real goal of lawmakers.
Florida Citizens “will always be able to pay claims” – CEO Cerio was published by: www.Artemis.bm
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This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred. Rating agency AM Best has explained that the expansion of named peril lists on reinsurance and retrocession arrangements at the January 2024 renewals, is not expected to make […]
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Rating agency AM Best has explained that the expansion of named peril lists on reinsurance and retrocession arrangements at the January 2024 renewals, is not expected to make a material difference in terms of the risk covered.
Commenting on the reinsurance renewals from an insurance-linked securities (ILS) perspective, AM Best noted that the more balanced supply and demand in the reinsurance market has resulted in some concessions on the list of named perils covered.
At the January 2023 renewals, “Capacity providers made great efforts to movecontracts to a named-perils basis,” AM Best explained.
Adding that, as a result, “Deals were often limited to only two perils: earthquakes and named windstorms.”
But, at January 2024, with more capital in the market, AM Best noted that there has been an expansion of the named perils list, for some transactions at least.
“For themost part, reinsurers maintained the named-perils basis in Januarv 2024,” AM Best said. “But because supply and demand were more easily matched this year and certain deals were oversubscribed, brokers were able to push for limited compromises on terms.”
The rating agency further explained that, “In some cases, this resulted in additional perils being added to the named-perils list.”
But qualified that by saying, “However, attachment points have risen to such a degree that the inclusion of one or two more perils is unlikely to lead to a material difference in the risk covered.”
This appears to have been the most seen concession at the 1/1 renewals, as AM Best added in relation to terms and attachment points, “Aside from a few limited exceptions, capacity providers were unwilling to surrender prior year gains made on this front.”
The rating agency also said, “These conditions bode well for an ILS market in which investor and cedent interest in cat bonds remains high, despite a significant drop in loss multiples. And with respect to collateralized reinsurance, ILS managers plan to pitch the accomplishments of 2023 to potential investors during fund-raising in 2024.”
While the addition of some named perils to lists is indicative of the risk covered, it is not, of course, truly indicative of the risk being priced for.
While there has been some named peril expansion, it is a long-way from the shift to covering severe and convective weather in catastrophe treaties at lower levels in the tower that we saw in the past and there hasn’t been a major reversion back to providing aggregate coverage either, according to our sources.
But, it is a sign of what may be to come and once again, it is down to reinsurance underwriters and ILS managers to decide where the lines must be drawn.
To ensure they maintain a higher-level of return potential for their portfolios and don’t revert back to the terms seen back in the mid-2010’s, at the attachments that were in-force at the time.
Expanded named peril list at 1/1 unlikely to make material difference: AM Best was published by: www.Artemis.bm
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This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred. According to Artemis’ sources, activity in the industry-loss warranty (ILW) market has increased in the last few weeks, as reinsurance and insurance-linked securities (ILS) markets prepare for what […]
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According to Artemis’ sources, activity in the industry-loss warranty (ILW) market has increased in the last few weeks, as reinsurance and insurance-linked securities (ILS) markets prepare for what is anticipated to be an active 2024 Atlantic hurricane season.
As we’ve reported, long-range seasonal forecasts for Atlantic hurricanes have suggested a challenging storm season could be ahead.
As we said, one forecaster called for a “hurricane season from hell” in 2024, while another is seen as particularly aggressive in calling for a large number of storms.
As we also reported from the SIFMA ILS event last week, forecaster Phil Klotzbach, Ph.D., from the Department of Atmospheric Science of the Colorado State University, said that the odds of La Niña are “pretty elevated” while conditions suggest we might not necessarily see as much re-curvature of storms as we did last year.
Forecasts are now concentrating minds on what could be ahead this hurricane season, with the Atlantic also at record warmth in the main development region, where storms form and fuel themselves.
With all that going on, it makes sense those holding portfolios of US coastal hurricane exposure would be preparing themselves and their portfolios for what could be a busy year of watching the tropics.
At the SIFMA ILS event in Miami last week, the subject of industry-loss warranties (ILW) and hedging preparations for hurricane season came up with a number of our contacts at ILS managers and investors in the sector.
All said that activity in ILW’s had picked up in just the last few weeks, while we also met some active buyers for the instruments.
It seems with a busy hurricane season forecast, the main route to hedging the portfolios of ILS investments continues to be the ILW, with some discussing the county-weighted industry-loss triggered instruments as well.
There was also discussion of industry-index products being constructed to more accurately reflect peak exposures in catastrophe bond portfolios, as tools for hedging against US wind exposure.
One source told us that ILW pricing has remained under-pressure through recent weeks, recall that Artemis’ data on industry loss warranty (ILW) price trends was already signalling this would occur during the last quarter of 2023.
Managers of portfolios of ILS instruments, reinsurance and retrocession with significant coastal wind exposure in the United States are keenly focused on ensuring their peaks are managed and concentration risk is controlled, we are told.
All of which makes perfect sense, in a year where such high hurricane numbers are being forecast currently.
We are also told that interest in ILW’s for hedging is being shown in some quarters of the London market as well, where retrocession needs have remained less sufficient than in previous years.
While the retro market was far more balanced at the January renewals, not everyone managed to secure the hedging capacity they needed and some were waiting to see how Atlantic conditions developed.
For those with capacity to deploy in support of industry-loss based reinsurance and retro, now might also be a good time to deploy it, as the forecasts may also assist in holding rates up a little more and some are suggesting that the softening in ILW triggered instruments that we’ve seen in catastrophe bonds of late may be slowing or even halting at this time.
We are told that capacity remains in ample supply for ILW’s and industry-loss index triggered instruments, albeit becoming more selective than it was around the January renewals.
Of course, there’s still a long way to go until the hurricane season peak and with more season hurricane forecasts due out over the next few weeks, it will be interesting to see if the activity levels in trading instruments such as ILW’s can further increase.
ILW market activity rising, as preparations for hurricane season begin was published by: www.Artemis.bm
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This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred. The California Earthquake Authority (CEA) entered the January reinsurance renewals with almost one billion dollars more in risk transfer than a year earlier, as the group reached December […]
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The California Earthquake Authority (CEA) entered the January reinsurance renewals with almost one billion dollars more in risk transfer than a year earlier, as the group reached December 31st 2023 with $9.1 billion of protection in-force.
A year earlier, the CEA’s reinsurance tower had shrunk to around $8.2 billion after the January 2023 renewal, significantly down on the $9.44 billion high it reached at the end of 2021.
Through 2023, the CEA’s reinsurance and risk transfer tower was then relatively stable, reaching $9.26 billion of in-force risk transfer by November 1st.
The latest available disclosure of the CEA’s risk transfer arrangements shows $9.1 billion of in-force coverage at December 31st 2023, which comprises almost $6.8 billion of traditional reinsurance (some of which may be collateralized) and $2.27 billion of in-force catastrophe bonds.
As of today, the CEA still has this $2.27 billion of outstanding catastrophe bond coverage, as you can see in our cat bond sponsors leaderboard where the CEA is in 3rd position currently.
The CEA’s last catastrophe bond issuance was in December 2023, a $650 million Ursa Re Ltd. (Series 2023-3) transaction that went a long way towards replacing some $775 million that matured in late November.
View details of every catastrophe bond sponsored by the CEA in the Artemis Deal Directory.
The CEA now does not face another cat bond maturity until November this year, giving plenty of time for the earthquake insurance specialist to tap the cat bond market for more reinsurance and grow the overall transformer contribution to its risk transfer arrangements.
But, we still await visibility of the CEA’s progress at the key 1/1 reinsurance renewal, where some $2.2 billion of its reinsurance contracts in-force were due to expire.
Recall that, as we recently reported, rating agency AM Best had said that the CEA had stabilised its risk transfer and reinsurance program, while increasing its claims paying capacity to the 1-in-365-year return period, as of January 1st 2024.
Which suggests the quake insurer had likely more than replaced its expiring coverage, to lift the return-period coverage slightly.
With the insurers direct written premiums rising to $844 million driven by inflation, the need for more protection has been a factor over recent years. But at the same time the CEA has made coverage modifications, that are expected to reduce the need for reinsurance somewhat, although this may be cancelled out by the growth in exposure.
The CEA’s ultimate claims paying capacity has reached $20 billion by the end of 2023, with this $9.1 billion provided by reinsurance and cat bonds and that figure has grown 3.9% on a compound annual rate since the CEA’s inception in 1996.
Risk transfer, so reinsurance and catastrophe bonds, is the biggest single contributor to claims paying capacity, at 45%.
However, with the hard reinsurance market and more costly catastrophe bond pricing as well, the CEA’s risk transfer spend rose 15% year-on-year to the end of October 2023, to $479 million.
The CEA is now spending more than 58.7 cents of every premium dollar on reinsurance, which has risen by around 4.5 percentage points from 54.2 percent a year ago and pressures how the business is managed and what this cost means for policyholder rates.
View details of every catastrophe bond sponsored by the CEA in the Artemis Deal Directory.
CEA’s reinsurance tower reached $9.1bn pre-1/1, risk transfer costs up 15% was published by: www.Artemis.bm
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This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred. PGGM, the Dutch pension investment manager that allocates the largest amount to the insurance-linked securities (ILS) market on behalf of end-client the Dutch pension PFZW, ended 2023 with […]
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PGGM, the Dutch pension investment manager that allocates the largest amount to the insurance-linked securities (ILS) market on behalf of end-client the Dutch pension PFZW, ended 2023 with just over US $9 billion in ILS assets under management, as a slight uplift in capital deployed in euro terms and currency rates lifted AUM to a new high in USD.
PGGM has built out more allocations through one of its more recently launched insurance-linked securities (ILS) initiatives, the Nightingale Re Ltd. private mandate vehicle.
Through Nightingale Re Ltd., PGGM aims to partner directly with those needing reinsurance capital, entering into private transactions that can be significant in size.
Having launched Nightingale Re in time for the 2022 underwriting year, by the end of 2023 PGGM’s insurance-linked investments team had made 11 investments using the structure.
Back at the mid-point of 2023, the PGGM ILS portfolio that is invested on behalf of Dutch pension fund PFZW had reached EUR 8.1bn, which was around US $8.8 billion at the time.
We now know that by the end of 2023, PGGM’s ILS allocation had grown a little further to EUR 8.2 billion, which at December 31st 2023 currency rates meant it was above US $9 billion for the first time ever, at $9.06 billion to be precise.
PGGM allocates to the ILS asset class via 13 relationships with ILS managers and reinsurance firms across catastrophe bonds, collateralized ILS and quota shares.
In recent years, the investor has also opted to branch out beyond just ILS manager allocations, in particular with its Vermeer Re joint-venture rated reinsurer and the newer Nightingale Re private mandate structure.
Vermeer has been one source of efficient growth for PGGM’s ILS allocations in recent years, as the more than $1 billion balance-sheet and rated reinsurance company provides a source of risk-linked returns with leverage embedded, meaning capital deployed through the vehicle can deliver more in premium and therefore return-potential.
PGGM has always been incredibly conscious of the need to deploy capital efficiently to the space and Nightingale is now allowing its experienced insurance-linked investment team to partner more directly with insurers in the sector, including those that may not have worked directly with ILS investors before.
PGGM is looking to build long-term partnerships with cedents through Nightingale Re, while the strategy offers reinstatements and other features that afford flexibility and align it with cedents other reinsurance buys.
From 2006 up to the mid-point of 2023, the PGGM ILS portfolio had delivered a 6.3% return per-annum, a figure that has likely risen with the full-year performance from last year included.
PGGM remains the largest single investor listed in our directory of pension funds and sovereign wealth funds investing in ILS and reinsurance and is the biggest allocator in the ILS sector.
PGGM ILS assets surpass $9bn, builds-out mandates under Nightingale Re was published by: www.Artemis.bm
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This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred. The “step change” in property catastrophe reinsurance pricing, attachments and terms seen in 2023 has “broadly held” at the renewals so far in 2024 and analysts at KBW […]
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The “step change” in property catastrophe reinsurance pricing, attachments and terms seen in 2023 has “broadly held” at the renewals so far in 2024 and analysts at KBW said that, in the industry, almost no-one expects these changes to reverse anytime soon.
KBW’s analyst team were reporting from the Association of Insurance and Financial Analysts (AIFA) conference that was held earlier this week and came away feeling reinsurers and those providing capital to reinsurance are likely to experience stronger returns for a time at least, thanks to the step change’s that have been made.
At the conference, the analysts heard that, “Reinsurance executives remain very optimistic about the returns embedded in property catastrophe pricing, terms, and conditions.”
Adding, “2023’s “step changes” in property catastrophe reinsurance rates, attachment points, and terms and conditions have broadly held.”
The analysts noted that there has been “significant demand (mostly at the top of property towers) that is absorbing some of the capital generated through earnings,” which is helping to hold up pricing to a degree.
Concluding that, “Several executives acknowledged that another year or two of good reinsurer results (which, as 2023 proved, don’t require unusually low global catastrophe losses) should translate into more capital (traditional and/or ILS) deployed into catastrophe reinsurance.
“But almost no-one expects the 2023 “step change” in pricing and attachment points to reverse any time soon; reinsurers remain uninterested in assuming the frequency risk previously embedded in both low attachment points and aggregate covers.”
We understand that executives from Arch, RenaissanceRe and Everest all discussed the mid-year renewals at this event, saying that they expect broadly stable reinsurance pricing as demand will be continuing to increase, to soak up excess capital.
All of which is positive for the insurance-linked securities (ILS) market, even for catastrophe bonds where capital is pressuring price already as it suggests this pressure may prove limited.
Looking ahead to the mid-year and all-important Florida renewals, KBW’s analyst team came away from the AIFA conference feeling a picture of relative stability is the most likely outcome.
They explained that, “Most executives were increasingly optimistic about recent Florida reforms (most notably including the elimination of assignment of benefits and one-way attorneys’ fees) holding up, but remain reluctant to embed that in their near-term pricing assumptions and expect roughly stable mid-year property reinsurance pricing.”
The analysts expect the market to get a little easier for the primary players as well, with more stable reinsurance pricing, a little price leeway for upper-layers, but still accelerating primary rates at the same time, helping to improve returns for homeowners insurers.
Most P&C sub-sector management teams are optimistic about the outlook, the analysts said.
“We think it’s critical for investors to keep two things in mind: first, soft markets typically emerge much more slowly than hard markets, and (therefore) insurers typically produce very strong results even after P&C pricing peaks and starts to subside,” the analysts conclude on the state of the cycle, which also reads across to reinsurance and ILS as well.
2023 reinsurance “step change” broadly held, no desire to reverse it: KBW at AIFA was published by: www.Artemis.bm
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This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred. According to a report from analysts at BMO Capital Markets, a prominent reinsurance broking executive from Howden Tiger said that property catastrophe pricing power is likely to fall […]
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According to a report from analysts at BMO Capital Markets, a prominent reinsurance broking executive from Howden Tiger said that property catastrophe pricing power is likely to fall by up to 10% at the upcoming mid-year reinsurance renewal season.
The comments were made at the Association of Insurance and Financial Analysts (AIFA) conference yesterday.
The BMO Capital Markets’ analyst team report that the commentary from the Howden Tiger executive suggested an expectation that price pressure will be seen at the mid-year renewals, as appetites for writing more risk rises.
Another dynamic to watch out for at the mid-year reinsurance renewals is that “meaningful social inflation related insurance reforms in Florida, which appear to be showing signs of working/aiding insurers” could also play into appetites for risk, perhaps influence pricing as well.
The BMO analysts said that the broking executive further highlighted a recent trend for reinsurers becoming more willing to take on risk lower down in the reinsurance tower.
Which all ties in with the dynamics being seen and that we’ve been reporting on, of a growing appetite among reinsurers to make the most of hard market conditions, giving more confidence to take on some lower layer risk, following a year where reinsurance capital had appeared more cautious at mid to lower layers of the tower and retrenched higher up.
Reinsurance demand is also expected to rise further at the mid-year renewals, with the broking executive saying at the conference that organic growth in reinsurance could increase by low double-digits again at renewals.
A combination of factors continue to drive demand for reinsurance protection, including underlying property-replacement cost inflation and population growth, the analysts highlight.
A 5% to 10% decline in property catastrophe reinsurance pricing would not be an overly significant softening. It’s also unlikely to be even across layers and return periods, with higher layers likely to come under the most price pressure again, especially with competition from the catastrophe bond market.
In fact, some softening may be a rational response to an improving market situation, such as in Florida, although it is likely also driven by the fact major losses have not been as significant over the last year, since reinsurance capital retrenched higher up and away from the frequency losses that have hurt insurers over the last twelve months in the United States.
Commenting on what they heard at the AIFA event, BMO Capital Markets analysts said, “Should this prediction come to fruition, it shouldn’t come as a major surprise to most investors who we estimate appreciate property-CAT pricing power is closer to its peak, assuming normal weather loss activity. That said, we do estimate a higher end of the range 10% pricing decline could put incremental EPS pressure on some reinsurance segments within reinsurance stocks (note: most reinsurers write a lot of non-property insurance, which is seeing pricing accelerate).
“We also point out that supply/demand dynamics within the reinsurance marketplace remain tight, meaning should there be a major property loss, we estimate pricing would re-accelerate.”
Property cat pricing power could fall 5% to 10% at mid-year: AIFA conference was published by: www.Artemis.bm
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This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred. Universal Insurance Holdings, a Florida headquartered insurer that is a bellwether for signals of appetite for risk and use of reinsurance for those operating in the state, is […]
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Universal Insurance Holdings, a Florida headquartered insurer that is a bellwether for signals of appetite for risk and use of reinsurance for those operating in the state, is aiming to expand its business in Florida once again, with its CEO citing much better conditions after the legislative reforms.
At the same time, Universal has also revealed securing 90% of its first-event reinsurance tower for 2024 already and more multi-year coverage as well, as the company once again gets out early to avoid the market congestion around the mid-year renewals.
Stephen J. Donaghy, Chief Executive Officer, discussed the state of the Florida property insurance market during the recent Universal earnings call.
He explained, “Now that we’re past the 1-year anniversary date of the 2022 special legislative session and all new and renewal policies are subject to the new legislation, the impact of the reforms is becoming clear.
“Claims trends across the board are improving, including reductions in total claims, represented claims, assigned claims, and daily claims.”
Donaghy’s comments mirror those of other’s in Florida, where some carriers are expressing a growing appetite for expansion into the state.
“Given our size, scale, independent agency and reinsurer relationships and the recent steps we’ve taken, we are particularly well positioned to succeed in the revamped Florida environment,” Donaghy added.
Discussing Universal’s plans for growth, Donaghy said, “We grew last year outside of Florida and, beginning in December, we began adding policies to our Florida book of business as well.
“We are laser-focused on profitability and where the business is coming from. Not all counties or territories in the state are behaving identically, so we are being very careful as we head into the future in this new environment.”
“We felt it was very prudent to be extremely cautious or cautious as we went through 2023 because the legislation didn’t affect all policies until the renewal point of each and we wanted to make sure that we had enough dry-powder to handle the business, as well as be positioned going forward to be very secure as we look to begin to grow the business once again,” he added.
Part of that security is reinsurance and Universal has again ventured to market early, to secure indications for a renewal of the tower it had a year ago.
Donaghy said that, “Our first event 2024-2025 reinsurance tower is already 90% secured, and we’ve negotiated additional multiyear capacity for the future.”
Continuing to say, “We are sitting at 90% accomplished for the first tower. We are very pleased with how our team performed in the market.
“The reinsurance now is a year-round effort for myself and our reinsurance team, Matt Palmieri in particular, and we feel really good about where we’re at.”
Universal has been using its own captive reinsurer in recent years as well, as a way to navigate the challenging hard reinsurance market.
That’s an option for 2024 too and Donaghy said, “I don’t think that we will change our philosophy on how we have used the captive in the past.”
But he also said that, “If the open market comes in at a competitive rate, we would consider that in lieu of. But as I sit here today, I think we would continue and it worked out very well for the company last year.”
Universal aims to expand in Florida again, secures 90% of first-event reinsurance was published by: www.Artemis.bm
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This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred. Having made recoveries under its aggregate reinsurance arrangement in 2023, US insurance giant Progressive has successfully renewed this important protection for 2024 and also purchased a new hurricane […]
Industry Loss WarrantyThis content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.
Having made recoveries under its aggregate reinsurance arrangement in 2023, US insurance giant Progressive has successfully renewed this important protection for 2024 and also purchased a new hurricane season specific reinsurance cover already, to run from June 1st.
As we’d reported last year, Progressive had begun to record reinsurance recoveries under its aggregate catastrophe reinsurance arrangements, as the company had forecast was likely to occur.
Now, the firm’s annual filing shows that its aggregate losses exceeded the first layer annual retention threshold by $17.9 million during 2023.
That’s lower than the recoverable the insurer had been talking about after its September results, when it had said it was recording a reinsurance recoverable of approximately $21 million.
Loss quantum aside, Progressive’s annual aggregate reinsurance arrangement did what it was supposed to in 2023, paying out when the company’s losses exceeded the retention.
At the January 2024 reinsurance renewals, Progressive successfully purchased a new aggregate cover for this calendar year.
The insurer said that a new aggregate excess-of-loss program for claims occurring in 2024 was secured, with multiple layers providing for a total aggregate reinsurance coverage amount of $185 million for catastrophe event losses and ALAE.
A first retention layer threshold ranges from $450 million to $475 million, which is lower-down than the 2023 arrangement, and provides for $85 million of cover after per-occurrence deductibles of between $5 million and $7.5 million, depending on the peril covered.
There are also event caps in place, of $42.5 million or $45 million, again dependent on the peril in question.
The second retention layer threshold for 2024 sits at $525 million, providing $100 million of cover above that, with deductibles of $20 million or $25 million and caps of $175 million or $180 million, depending on the covered peril.
The first layer does not cover named tropical storms and hurricanes, while the second layer does and also features a secondary coverage part with a retention threshold of $425 million that shares the same $100 million limit and covers named storms and hurricanes only.
Also of note, Progressive had a 2023 hurricane season reinsurance cover that ran from June 1st to December 31st, which was shared limit coverage in its reinsurance program and provided $125 million in cover.
For 2024, Progressive has already purchased this hurricane season cover again, on similar terms, to run from June 1st, but this time upsized to provide $175 million in cover.
It’s also worth noting that, as we reported last month, qualifying aggregate catastrophe losses failed to reach the attachment point for one tranche of Progressive’s Bonanza catastrophe bonds, meaning the zero-coupon one-year cat bond deal was allowed to mature and investors got their full capital back.
Read all of our reinsurance renewals news.
Progressive renews aggregate reinsurance & 2024 hurricane season cover was published by: www.Artemis.bm
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