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Hard Market Conditions Predicted to Continue through 2024, RBC Capital Markets Forecasts Additional Rebalancing

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The resilience of the hard market is anticipated to extend well into 2024, with RBC Capital Markets predicting a continued rebalancing that promises intriguing opportunities for insurers and investors alike.

Analysts at RBC Capital Markets predict that the hard reinsurance market environment will continue into 2024, as the industry strives to achieve sufficient returns. According to RBC, there will be a rebalancing of the insurance value chain between primary insurers and reinsurers, as both recognize the unfairness of how losses were shared in the past.

The 2023 renewals brought about significant changes and disruptions, as reinsurers aimed to focus on absorbing shocks from large events rather than earnings events, which they believe should be handled by the primary market. However, heading into 2024, reinsurers’ expectations seem to be better aligned and more predictable.

RBC’s outlook suggests that rate increases in 2024 will range from flat to +5% on a risk-adjusted basis. Reinsurers can also anticipate further adjustments to terms and conditions, favoring their interests.

Analysts also note that renewal volumes may have been affected by primary players’ tighter reinsurance budgets and the preference for excess of loss contracts over quota shares, as reinsurance firms have more pricing autonomy in the former.

Looking ahead, analysts foresee an increase in demand for reinsurance, driven by a resurgence in primary rates and potentially heightened risk aversion. The supply and demand imbalance is particularly felt in the area of natural catastrophe risk.

In conclusion, the reinsurance market is expected to remain challenging in the coming years, with reinsurers and primary insurers working to establish a fairer distribution of losses. Adjustments in rates, terms, and conditions will continue, and demand for reinsurance is likely to rise as primary rates increase and risk aversion intensifies.

– RBC Capital Markets:

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