Report: Despite Favorable Reinsurance Renewals, Primary Insurance Rates Remain Firm

As reinsurance rates stabilize, Lockton says higher property insurance rates persist, driven by insurer concerns over catastrophe losses and increased primary retentions
By: | March 5, 2024
Rescue worker inspecting destroyed building

The reinsurance market is showing signs of returning to normalcy, with rates for reinsurance catastrophe coverage stabilizing and a positive property insurance rate environment expected to persist in the first half of 2024, according to a recent analysis by broker Lockton Cos. LLC.

The report indicates that the reinsurance market, which experienced difficult treaty renewals a year ago, is now seeing a leveling off in rates for catastrophe coverage, backed by abundant capacity. This is largely due to reinsurers’ comfort with attachment points and pricing for catastrophe coverage, following significant profits generated over the last 12 months.

However, the property insurance market continues to pose challenges for buyers with significant catastrophe exposures, recent losses, or difficult occupancies, Lockton noted. Despite some rate deceleration, property insurance rates are still on the rise for the majority of policyholders. Insurers are also retaining more risk today than two years ago, and are considering passing on these increased loss costs to retail insurance buyers, the broker explained.

“Insurers remain concerned about catastrophe losses, including many that stem from so-called secondary perils, such as wildfires and convective storms,” the report states. In 2023, 28 separate weather events resulted in total economic losses of $1 billion or more each in the United States, marking the highest number of billion-dollar events recorded in a calendar year.

Meanwhile, some of the drivers of higher property insurance loss costs may be easing.

The U.S. Federal Reserve has made progress at reining in headline inflation, which slowed to 3.1% year over year in January 2024, Lockton noted. The cost of construction materials has also declined in recent months, with prices for lumber and wood products falling 9.2% from December 2022 to December 2023.

The report concludes with recommendations for commercial insurance buyers, including reevaluating their organization’s appetite for risk and volatility, engaging their broker’s analytics team, starting renewal processes early, and leveraging full relationships with individual insurers.

Read the full report on Lockton’s website. &

The R&I Editorial Team can be reached at [email protected].

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