Howden research report

We are delighted to present our latest research report for the reinsurance market.

The report titled, A Tipping Point, reveals the drivers behind the significant shifts taking place in the reinsurance market ahead of year-end renewals.

Our research demonstrates how the three Cs of climate, conflict and capital are coalescing to create a tipping point for the reinsurance market, with 2022 mid-year renewals seeing rate increases accelerate to their highest levels since 2006. 

Major macroeconomic and geopolitical realignments this year – including rapidly rising core inflation, supply chain disruption and a war in Europe – are exacerbating pre-existing pressures around climate risk especially and, crucially, changing assumptions around yields, capital and loss costs. Conditions are hardening in several areas, as reinsurers adjusts to a new world order.

Climate
The property-catastrophe market is currently in the eye of a price, risk and inflation storm. Reduced capital inflows, along with rising ‘secondary’ peril losses, have strengthened reinsurers’ resolve to meet rising costs of capital. All of these factors are starting to tell, with signs of distress at mid-year renewals and pressures expected to persist into 2023. 
 
Conflict
Whilst Ukraine war claims are likely manageable overall for the (re)insurance sector, the concentration of losses amongst premium-light lines of business will lead to disproportionate pain. With unexpected war losses coming fast on the heels of unexpected pandemic losses from Covid-19, reinsurers’ exposure to loss aggregation in such a volatile risk landscape has contributed to the transitioning reinsurance cycle in 2022.
 
Capital
Capital impacts have been significant, as asset markets adjust to the end of the ‘great moderation’. 2022 already represents a local low for dedicated reinsurance capital. Even assuming a recovery in financial markets in the second half, which is far from assured, capital losses are unlikely to recover fully this year.