Category Archive : Reinsurance renewals

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Kin Insurance has increased the amount of catastrophe reinsurance limit it will have in-force for the hurricane season by 16% for Florida risk alone, growing its reinsurance tower for that state to $1 billion.

kin-insurance-logoAt the same time, signalling continued expansion for the insurtech writer, Kin Insurance has also secured a $145 million catastrophe reinsurance tower for exposures in other states at the June 2024 renewals.

A year ago, Kin Insurance secured $860 million of reinsurance for Florida catastrophe events and was covering just the Kin Interinsurance Network up to the one-in-200 year return period level.

That came soon after Kin sponsored its first catastrophe bond, a $100 million Hestia Re Ltd. (Series 2023-1) deal, which is a component of the Florida reinsurance tower.

For 2024, the Hestia Re cat bond remains in-force and that multi-year coverage will have been helpful as Kin upsized its renewal this year.

Kin said its new reinsurance arrangements cover its “expanding market footprint,” and balance the robust growth plans of the underwriter with a prudent approach to risk management.

Citing “favorable economic terms”, Kin has secured $1 billion in reinsurance coverage for natural catastrophes in Florida, which it said represents protection of up to a one-in-160 year first-event loss.

It’s perhaps notable and reflective of Kin’s growth in Florida, that the larger reinsurance tower only covers the insurer to a lower return-period than the 1-in-200 year level it was protected to a year ago.

In addition, the company has purchased $140 million in coverage for catastrophe events outside Florida as well, which it said is also well in excess of the required rating agency requirements.

Kin also said that its renewed reinsurance program is backed by a consistent panel of  over 35 industry-leading reinsurers, all rated A- or higher by AM Best, or providing 100% collateralized reinsurance protection.

“We’re pleased to have again completed our reinsurance program in a timely and responsible manner,” Angel Conlin, chief insurance officer at Kin said. “The continued support from our reinsurance partners validates our data enabled and technology-driven underwriting and responsive claims handling.”

Kin lifts Florida reinsurance tower 16% to $1bn, gets $140m for other states was published by: www.Artemis.bm
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The California Earthquake Authority (CEA) has maintained its reinsurance and catastrophe bond tower at $9.1 billion in size through the start of 2024, with its most recent renewals for April 1st seeing the insurer securing almost $1.2 billion in protection.

cea-california-earthquake-authorityWhen we last covered the CEA, we reported that the group had reached December 31st 2023 with $9.1 billion of protection in-force from its reinsurance and cat bonds.

That was based on end of year data and the CEA had a significant reinsurance renewal at January 1st as well, but we’ve now learned that the earthquake insurer has come through that and April renewals and maintained the same level of catastrophe risk transfer protection.

Renewing such a large risk transfer program is not without its challenges and the CEA has said before that its risk-transfer costs and the amount of risk transfer needed are its largest financial headwinds.

For full-year 2023, the CEA’s risk transfer expenses reached $585 million, which was up 18% on the previous year, as the effects of the hard reinsurance market took hold.

Managing that means needing more rate coming in on the inward earthquake insurance side of the CEA’s business, but the Authority is also very tactical in its reinsurance and catastrophe bond buying as well, as it looks to manage market cycles.

Back in March, the CEA’s leadership team heard that the risk transfer market was “modestly improving”, which helped it increase its overall reinsurance and cat bond tower to around $9.1 billion for the start of 2024.

The CEA’s approved risk transfer budget is also set at just under $585 million for 2024, of which by April 30th 37.6% or just over $220 million has been used.

At the key 1/1 reinsurance renewal this year, some $2.2 billion of the CEA’s reinsurance contracts in-force were due to expire and it appears were more than renewed, with over $2.57 billion of reinsurance secured at January 2024.

After April 1st, which is one of the CEA’s larger reinsurance renewal periods, the size of the risk transfer tower has not changed, with still $9.1 billion of reinsurance and cat bonds in-force at that time.

At the recent April renewal, the CEA secured just under $1.16 billion in new reinsurance, helping to maintain its risk transfer program at the same stature it had reached at the end of 2023.

Which means the CEA has renewed $3.73 billion of reinsurance in 2024 so far.

The CEA has not sponsored a new catastrophe bond since last December, so as of today, the CEA still has $2.27 billion of outstanding catastrophe bond coverage, as you can see in our cat bond sponsors leaderboard where the CEA is in 5th position currently.

But catastrophe bonds remain a very significant contributor to the CEA’s risk transfer arrangements, while the insurer also utilises other ILS market solutions in fronted reinsurance form, we understand.

View details of every catastrophe bond sponsored by the CEA in the Artemis Deal Directory.

The CEA’s reinsurance tower had shrunk to around $8.2 billion after the January 2023 renewal, and still remains smaller than the $9.44 billion high it reached at the end of 2021.

The CEA now has another $85.5 million of reinsurance that expired at the end of May 2024 and a further almost $800 million of reinsurance cover expiring before the end of July this year.

So we expect the CEA will be busy in the market at this time, renewing and replacing much of this expiring protection and it will be interesting to see if the tower grows when the next data becomes available to us.

Finally, the CEA’s next catastrophe bond maturity is scheduled for the end of November this year, so it will be interesting to see if the insurer comes back to market to replace that $215 million Ursa Re II Ltd. (Series 2021-1) issuance.

With the cat bond market keen for diversifying risks at this time, given the US wind heavy issuance we’ve seen, a new cat bond from the CEA might be welcomed and could receive a positive investor response.

View details of every catastrophe bond sponsored by the CEA in the Artemis Deal Directory.

CEA risk transfer tower stable at $9.1bn after near $1.2bn April renewal was published by: www.Artemis.bm
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New Zealand’s EQC Toka Tū Ake, previously known as the New Zealand Earthquake Commission, has added more limit to its reinsurance tower, lifting the top by $1 billion for 2024, in a renewal securing $9.2 billion of cover for disaster losses in the country.

tina-mitchell-new-zealand-eqcThe EQC has been growing New Zealand’s disaster reinsurance protection over recent years, from a nearly $7 billion reinsurance tower in 2021, to $7.2 billion for 2022, then $8.2 billion for 2023.

Typically, a number of insurance-linked securities (ILS) funds participate, taking a small share of the reinsurance program on a fronted basis in recent years.

But, of course, the EQC also made its first foray into the catastrophe bond market in 2023 and that NZ $225 million Totara Re Pte. Ltd. (Series 2023-1) catastrophe bond is still in-force and part of the reinsurance tower this year.

A driver for more reinsurance being required by the EQC has been the doubling of the building cover cap enforced by New Zealand’s government, which occurred in late 2021.

The use of reinsurance to support the EQC helps to keep homeowners insurance more affordable, by providing capital to finance recovery after major natural disasters occur and aggregating New Zealand disaster risk to distribute it to international reinsurance and capital markets.

“The continued growth of the programme demonstrates the confidence the international market has in our national insurance scheme,” explained EQC Chief Executive Tina Mitchell.

“Once again, we have been really well supported by our reinsurance partners, with many substantially increasing the amount of capital they have committed to the programme.”

Mitchell went on to explain that the increased interest in the reinsurance renewal seen this year included both existing partners increasing their offering, as well as offers from new and returning markets.

“It is always encouraging to see partners returning to the programme and new reinsurers wanting to support our scheme.  We see this as a huge vote of confidence in New Zealand and our approach to natural hazard risks,” Mitchell added, reiterating that securing reinsurance is one of EQC’s primary tasks.

She explained, “New Zealand homeowners pay an EQC levy of up to $480 (plus GST) for the first $300,000 of natural hazard damage to their homes.

“We use some of that levy to buy reinsurance so we can be confident there are always funds available to meet any claims that may arise. This keeps the scheme affordable for homeowners and protects the Crown from financial risks in the event of a major event like the Canterbury earthquakes.”

The EQC’s reinsurance coverage only attaches after a loss event that results in over $2.1 billion in claims and is seen as a financial buffer for the nation’s economy.

The reinsurance tower has only attached is cover twice in history, after the Canterbury earthquakes in September 2010 and February 2011, when EQC received about half a million claims which are currently estimated to cost around $12 billion.

“Most of the time the EQC scheme is able to cover events, even the bigger events like Cyclone Gabrielle, through levies, but reinsurance protects New Zealand from any future devastating events and helps to ensure we will be able to pay claims when they fall due,” Mitchell said

“We can’t change the natural hazards we live with in our beautiful country, but we can prepare ourselves to reduce the impact of those hazards and provide a safety net to help New Zealanders recover from any major event.”

NZ EQC adds $1bn to reinsurance tower, securing $9.2bn for 2024 renewal was published by: www.Artemis.bm
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As the June 1st Florida reinsurance renewals come to their close, rating agency AM Best has said that it believes the pendulum remains “slanted toward reinsurers,” but also notes that some ground has been given, in terms of a less challenging renewals and moderated rate environment.

florida-map-pendulum-reinsuranceHowden Re reported yesterday that, by its measure, property catastrophe reinsurance rates averaged -5% down at the Florida focused June renewals.

Rating agency AM Best notes the “considerably high level of dependency” that Florida’s insurance industry has on global reinsurance capital in a new report.

Because of this dependency, Floridian carriers are exposed to fluctuations in reinsurance prices and terms, as well as the availability of coverage at different layers in their towers, all of which has been a significant challenge for insurers over the last couple of years.

Florida-focused personal property insurers reinsurance dependency “skews higher than the broader overall property segment,” AM Best explained.

Demonstrating how much higher their reinsurance dependency is, AM Best says that active Florida specialists, in the aggregate, have ceded reinsurance leverage of 514.7%, compared with its personal property composite average of 59.1%.

“While some of these primary insurers use reinsurance arrangements to generate income strategically through ceding commissions, a considerably high level of dependency can indicate greater sensitivity to changes in reinsurance pricing and availability,” the rating agency explained.

While the dependency remains very high, AM Best noted that conditions are better at the June reinsurance renewals this year, but still the reinsurance community remains in the driving seat in Florida.

“As we approach mid-year renewals, the pendulum remains slanted toward the reinsurers, but as the Florida specialist companies find balance, particularly with risk accumulations, it may provide better footing for negotiation for primary carrier,” AM Best explained.

The rating agency highlighted signals that Florida’s insurance market is improving, such as the filing of some rate reduction requests, which we reported on recently here.

Reinsurers are optimistic that the effects of recent legislative reforms will benefit them, but for now AM Best believes they are “in a wait-and-see stage as reinsurers appear to be keeping capacity steady for mid-year renewals.”

AM Best says it is “cautiously optimistic” on the Florida property insurance market.

“While still too early to declare a win in the Florida personal property market, the signals look promising. The legislative reforms and declining Citizens’ policies in force mark a step in the right direction. Time will tell if favorable market results will continue and effectively managing hurricane risk is an ongoing challenge,” the rating agency said.

Adding, “AM Best is cautiously optimistic about the overall state of the market and mid-year reinsurance renewals are expected to reflect some level of optimism in the overall marketplace.

“While there are signs of stabilization, sustaining these improving market conditions will be critical.”

Read all of our news and analysis on the Florida insurance and reinsurance market.

Florida pendulum still with the reinsurers, but cautious optimism returns: AM Best was published by: www.Artemis.bm
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With pricing moderated slightly at the mid-year reinsurance renewals, analysts at Fitch Ratings note that this shouldn’t be construed as softening, saying that terms and conditions are holding firm and discipline is expected to persist.

mid-year-reinsurance-renewalFitch Ratings said that the June and July reinsurance renewals in 2024 are in seeing rate movements that are in contrast to the hardening seen a year earlier.

“At the June/July midyear 2024 reinsurance renewals, pricing is moderating, with risk-adjusted rates generally flat to down slightly. This is in contrast to the 2023 renewals, when Florida property experienced 30%-40% rate rises for catastrophe loss hit business, reflecting the impact of Hurricane Ian in 2022,” the rating agency said.

But added that, “Terms and conditions are holding firm, with retentions steady and not returning to levels that provide earnings protection to cedents.”

As a result, the reinsurance market seems to be meeting the needs of cedents in Florida and beyond at this mid-year renewal season, albeit still at pricing and attachment levels higher than many would have liked to see.

But overall capital strength in the re/insurance industry remains high, Fitch says, which provides the sector “an ability to absorb near-term large insured losses from an individual hurricane or other catastrophic event.”

But the rating agency also noted that, pertinent for the coming hurricane season, “A confluence of large events in a short period may lead to capital reductions and rating pressure.”

Not every carrier is as well-capitalised though and Fitch also highlights the fact, “Florida specialty insurers’ capital tends to be weaker than that of their larger and national peers. Weakened capital positions at individual Florida specialists could be challenged in the event of a significant catastrophe year.”

Still, the global reinsurance and insurance-linked securities (ILS) markets support a significant portion of Florida exposures, which helps these carriers in the face of elevated losses.

Some loss affected accounts experienced rate increases in Florida at the June reinsurance renewals, signalling that the reinsurance and ILS markets still require an adequate return to deploy capacity there.

Capacity support is in fact growing, with Fitch explaining that, “Reinsurance and retrocession capacity to the Florida market are increasing from both traditional and ILS sources, including record issuances of catastrophe bonds, where spreads are at double-digits. This reflects favorable expected returns on property catastrophe risk following several rounds of price increases.”

The rating agency added that, “Even with the added capacity, Fitch expects the reinsurance market to maintain its discipline and support rate adequacy as catastrophe risk remains high with climate change concerns.”

Reinsurance demand proved to be particularly strong in Florida at the mid-year renewals, especially for the higher layers where catastrophe bonds have provided significant support.

Demand has risen thanks to growth at carriers, with depopulation from Citizens one source, as well as still rising exposure levels and the removal of some state-backed reinsurance layers in 2024.

Another factor is the improving Florida market environment, with recent legislative reforms seemingly having a positive effect.

Fitch said, “As a result, demand for reinsurance coverage increased at the June/July 2024 renewals, as Florida property specialists gain confidence in their ability to profitably offer property insurance.

“However, the financial benefit of the reforms needs to be proven out over time before it could pressure meaningful declines in reinsurance pricing.”

Read all of our reinsurance renewal coverage here.

Mid-year reinsurance renewal pricing moderates, but discipline to persist: Fitch was published by: www.Artemis.bm
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Universal Insurance Holdings, Inc. has purchased first-event catastrophe reinsurance coverage of up to $2.4 billion, down from the previous year’s just over $2.8 billion, citing no material changes to reinsurance partners and ILS manager Nephila Capital again named as a significant market for the company.

universal-insurance-holdings-logoFor its subsidiary firms Universal Property & Casualty Insurance Company (UPCIC) and American Platinum Property and Casualty Insurance Company (APCIC), Universal has set the top of its combined reinsurance tower for a single All States (including Florida) event at $2.404 billion for the 2024 to 2025 year.

A year ago, that was set at $2.831 billion, which was also down from over $3.1 billion of reinsurance needed in the previous year.

While Universal’s business has fluctuated in size somewhat, there are other considerations like the changes to state-backed reinsurance layers such as Florida’s RAP and FORA to consider in the mix, all of which drove resulted in Universal’s “demand for private market capacity increasing significantly,” the insurer explained.

UPCIC’s in force wind-covered policy count in Florida declined by 25,266 up to the end of March, which drove a year over year reduction to the top end of its first event reinsurance tower, the company said.

Notably for our readers, Universal opted to renew an expiring $150 million of catastrophe bond coverage (the Cosaint deal) in the traditional reinsurance market this year, marking a departure in strategy versus many other Floridians that have bought more cat bond cover in 2024.

Universal noted that its biggest reinsurance providers in 2024 were Nephila Capital, Markel, RenaissanceRe, Munich Re, Chubb Tempest Re, Ariel Re, Everest Re and Lloyd’s of London syndicates, so it’s clear ILS capital remains a major component of the tower overall.

“We are pleased to announce the completion of the 2024-2025 reinsurance program for both of our insurance companies,” explained Matthew J. Palmieri, Chief Risk Officer. “Reinsurance serves as the fulcrum of our insurance entities’ ability to absorb multiple catastrophic events in a given year, protecting policyholders and allowing operations to continue smoothly. For this renewal, we approached the market with considerably more private market catastrophe capacity demand and the Company executed efficiently with our long-standing reinsurance partners ahead of the upcoming 2024 Atlantic Hurricane Season. We also added new multi-year coverage extending through the 2025-2026 reinsurance period in the process.”

Universal also noted that $1.023 billion of its reinsurance tower will automatically reinstate to provide some multi-event protection, which is up by $177 million in aggregate limit that is available for subsequent events compared to a year earlier.

$240 million of catastrophe reinsurance provides multi-year coverage into the 2025-2026 treaty year, $165 million below the Florida Hurricane Catastrophe Fund and $75 million above it.

The combined first event retention for a loss in all states including Florida is unchanged from the prior year at $45 million.

Universal said that the total cost of its 2024-2025 catastrophe reinsurance program for UPCIC and APPCIC is projected to be around 33% of estimated direct premiums earned for the 12-month treaty period, up from an estimated 31.8% a year earlier.

That likely reflects the increased private market reinsurance limit needed in 2024, but the participation of third-party capital across its reinsurance panel will have helped in ensuring capital efficiency at this renewal.

Universal had already secured this renewal back before May began, as the company got into the market early again this year.

Read all of our reinsurance renewals news and analysis.

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HCI Group Inc. has secured $2.7 billion in aggregate reinsurance limit for its main P&C insurance underwriting subsidiary Homeowners Choice Property & Casualty Insurance Company, Inc. subsidiary and for its digital insurtech company TypTap at the renewals.

hci-group-logoThe company has extended coverage across its business and is now also considering the use of what it terms “additional risk transfer instruments” for the coming wind season.

It’s a sign of the growth HCI has been experiencing, having secured policies from the Florida Citizens depopulation program, as well as growing its book organically as well.

HCI’s catastrophe reinsurance programs for the 2024-2025 treaty year run from June 1st 2024 through May 31st 2025 and now comprise total aggregate limit of $2.7 billion, the company said today.

Paresh Patel, HCI’s chairman and chief executive officer commented, “We appreciate the broad support we received from our valued reinsurance partners.

“HCI continues to maintain a conservative approach to its reinsurance placement. This includes securing additional limit this year to support the significant growth we have achieved over the past few months.”

Two reinsurance towers have been renewed for the HCI insurance subsidiaries, Homeowners Choice and TypTap, with Tower 1 covering all Homeowners Choice policies issued in Florida, while Tower 2 shared between TypTap and Homeowners Choice and covering all TypTap policies including Florida, as well as Homeowners Choice policies issued outside of Florida.

Similar to the prior year, HCI has a retention of $14 million for Reinsurance Tower 1 and $9 million for Reinsurance Tower 2.

HCI Group says it anticipates incurring net consolidated reinsurance premiums ceded to third parties, excluding its own internal reinsurer Claddaugh, of approximately $333.6 million this year, assuming no losses occur.

That’s up from $266.6 million in net consolidated premiums incurred from the previous year’s reinsurance towers.

Among the private reinsurers backing HCI this year are reported to be Arch Reinsurance Ltd., Chubb Tempest Reinsurance Ltd., Endurance Specialty Insurance Ltd., Everest Reinsurance Company, Hannover Ruck SE, Markel Bermuda Limited, National Liability & Fire Insurance Company, Transatlantic Reinsurance Company, various Lloyd’s syndicates, and its own Bermuda-based reinsurance subsidiary, Claddaugh Casualty Insurance Company Ltd.

The private reinsurance that has been renewed covers, in general, hurricanes, tropical storms, tornados, hailstorms, wildfires and other large events, HCI said.

Additional reinsurance, outside of these towers, was secured for Condo Owners Reciprocal Exchange (CORE), an HCI-sponsored reciprocal insurer.

Tower 1, for HCI in Florida, will provide $1.12 billion of reinsurance for catastrophic losses from a single event in the state, with total coverage for all occurrences of $1.66 billion and a retention of $14 million for the first and second events.

Tower 2, for HCI outside Florida and TypTap everywhere, provides reinsurance for $723.3 million of catastrophic losses from a single event in Florida, and up to $410.0 million from a single event outside of Florida, with total coverage for all occurrences of $1.11 billion after a retention of $9.0 million for the first and second event.

The larger towers for 2024 reflect HCI Group’s growth and its assumption of policies from Citizens in Florida, all of which is making it a reinsurance buyer of growing stature in the market.

It’s interesting to hear it continues to consider additional risk transfer and it would be interesting to see whether catastrophe bonds feature in HCI’s reinsurance arrangements in future, to help support its growing need for protection.

Read all of our reinsurance renewal coverage here.

HCI renews $2.7bn of reinsurance limit, considers buying more for wind season was published by: www.Artemis.bm
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According to Howden Re, the reinsurance broking arm of Howden, property catastrophe reinsurance rates-on-line fell by 5% at the June 1st renewals, with pressure greatest at the upper-layers of towers.

property-catastrophe-reinsurance-rates-on-line-howdenAcross the market, Howden Re says that property catastrophe reinsurance renewal rates fell in a typical range of -7.5% to – 2.5%.

Overall, the market experienced what Howden Re terms “a moderation” at the June reinsurance renewals, driven by an abundance of capacity for higher-layer risks.

This “period of adjustment” is due in part to the rebound in dedicated reinsurance sector capital, the broker explained, which it now says exceeds 2021 levels.

Strong ILS market inflows have supported this capital resurgence, Howden Re believes, growing capacity for the top of programmes and driving risk-adjusted rate reductions in higher layers.

It’s interesting to note that this is the first decline in property cat RoL’s in Howden Re’s data set since 2017.

It’s perhaps too early to read into whether this continues and capacity build-up drives further reductions in early 2025 at the renewals.

But commentary from Howden Re, on traditional reinsurer appetite at a time of strong cat bond and ILS growth, does echo what we were hearing over a decade ago before the softening of rates through the early to mid-2010’s.

property-catastrophe-reinsurance-rates-on-line-howden

Interestingly, Howden Re notes that some cedents also secured improved terms as well, at the June renewals.

“Buyers and sellers engaged early in the year, with cedents targeting better terms and conditions to address previous increases in limits and attachments, as well as narrower wordings. Reinsurers exhibited a proactive stance by completing many programmes early, enabling the deployment of increased retrocession capacity as the renewal drew near. This strategic approach enabled some buyers to achieve more favourable terms in what remains a cautious market,” the broker said.

Wade Gulbransen, Howden Re Head of North America, commented, “It is crucial that our clients secure optimal coverage in this rapidly evolving landscape. This means not only finding capacity, but also ensuring it aligns with their risk profiles and financial objectives.

“Our focus remains on providing innovative thinking alongside dynamic placement strategies to meet these challenges head-on.”

In insurance-linked securities (ILS), Howden Re highlights “a notable increase in activity and competition” with increased supply for the higher-layers of reinsurance towers, helped by a growing catastrophe bond market on record-pace, but also by more capacity for retrocession as well.

“Collateralised retrocession capacity has likewise expanded, with capital providers’ assets under management growing significantly,” the broker added.

Further stating that, “The increased level of ILS interest reflects a broader market trend towards diversified alternative risk transfer mechanisms, offering reinsurers and cedents more options to manage their exposures.”

Perhaps a little concerning though, for the future rate discipline of the market, Howden Re also says that, “Some reinsurers have begun to re-focus on property risks, aiming to grow in peak zones including southwest wind.”

Which, for those in the market for more than a decade, will likely sound reminiscent of the early to mid-2010’s when reinsurers grew significantly into US catastrophe risks, at a time of ILS market expansion and growth, and the market became firmly-set into a softening phase.

Howden Re also notes that there could be some short-term rate pressures from the hurricane season and its forecasts for a very active year, rising loss estimates from hurricane Ian, plus the persistent challenges at lower-layers of reinsurance towers.

David Flandro, Head of Industry and Strategic Advisory at Howden Re, said, “The reinsurance market is at a critical juncture. While the recovery of dedicated capital and increased capacity signal a potential softening of rates, the forecasted active hurricane season and other market pressures could counteract these trends. Strategic adaptability and expert guidance are essential in navigating these dynamics.”

We’ve yet to hear of any adjustments to reinsurer appetite after the recent hurricane model update, despite it clearly moving pricing in catastrophe bonds. So that could be an additional interesting dynamic to watch out for, especially if traditional reinsurers are loading up on US wind risk in 2024.

Read all of our reinsurance renewals coverage here.

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Palomar Insurance Holdings, the speciality California-headquartered insurer that offers largely catastrophe exposed property products, has completed its reinsurance renewal for 2024 and lifted the top of its tower to $3.06 billion, with its largest catastrophe bond yet contributing to the coverage growth.

mac-armstrong-palomarA year ago, Palomar had renewed its reinsurance towers to provide $2.68 billion of coverage for earthquake events, with multi-year ILS capacity from its catastrophe bonds providing $875 million of that.

In recent weeks, we’ve documented Palomar’s issuance of its largest catastrophe bond to-date, as the company secured $420 million of California-focused earthquake reinsurance from the capital markets with the Torrey Pines Re Ltd. (Series 2024-1) issuance.

Now, the company has revealed full-details of its reinsurance renewal purchases, securing a reduction in attachment for the hurricane coverage and growing the reinsurance tower significantly.

The reinsurance programs incept at June 1st and saw Palomar purchasing $400 million of incremental limit to support the growth of its earthquake underwriting franchise.

Palomar’s total reinsurance coverage now extends to $3.06 billion for earthquake events, $735 million for Hawaii hurricane events, and $117.5 million for all continental United States hurricane events.

The insurer said this provides ample capacity for its growth in, as well as coverage to a level exceeding Palomar’s 1:250-year peak zone Probable Maximum Loss.

Palomar said that its per-occurrence event retention for 2024 is now $15.5 million for hurricane losses, down from $17.5 million the previous year, and $20 million for earthquake events, which is up from last year’s $17.5 million.

The insurer noted that these retention levels “continue to be meaningfully within management’s previously stated guideposts of less than one quarter’s adjusted net income and less than 5% of the Company’s surplus on an after-tax basis.”

Palomar highlighted the new $420 million of earthquake reinsurance secured through the fifth Torrey Pines Re catastrophe bond.

You can read about all of Palomar’s catastrophe bonds in our extensive Deal Directory.

“We are very pleased with the successful June 1 placement and are very grateful for the continued support of our reinsurance and ILS partners,” Mac Armstrong, Palomar’s Chairman and Chief Executive Officer expained. “Importantly, we renewed our reinsurance program at terms and pricing that were better than our initial expectations and reduced our hurricane event retention.

“As a result, we are raising our full year 2024 adjusted net income guidance to a range of $122 million to $128 million from the previously indicated range of $113 million to $118 million.”

Now, with the larger $420 million catastrophe bond under Torrey Pines Re, that more than replaces a maturing $400 million deal from 2021, Palomar has increased its multi-year ILS capacity within its reinsurance tower from $875 million last year to $895 million in 2024.

Palomar noted that this represents “diversifying collateralized reinsurance capital”, while its overall reinsurance panel features 90 reinsurers and ILS investors, including multiple new reinsurers added in 2024.

Palomar’s reinsurance tower features prepaid reinstatements for substantially all layers, which it notes limit the pre-tax net loss to $15.5 million for hurricane events and $20 million for earthquake events, with some “modest” additional reinsurance premium due.

Palomar’s Chief Risk Officer, Jon Knutzen, commented, “We are grateful for the broad-based support we received from the reinsurance market. It is a testament to our business mix and risk profile, which has been curated with the goal of delivering more stable, predictable results. We appreciate all our incumbent and new reinsurance partners who have helped us successfully complete our June 1 placement.”

You can read all about this Torrey Pines Re Ltd. (Series 2024-1) catastrophe bond and every deal issued since 1996 in the Artemis Deal Directory.

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With catastrophe reinsurance pricing expected to be largely flat to slightly down at the upcoming June 1st reinsurance renewals and little change expected to terms and attachments, analysts from KBW said the industry can expect “slightly less-excellent” returns ahead, implying still-strong expected underwriting profitability.

florida-reinsurance-renewalsIt’s no surprise to anyone that the KBW analyst team came away from a recent visit to Bermuda with the impression that property catastrophe reinsurance pricing at the June renewal is likely to be in a range from flat to slightly down, by as much as -5%.

That’s been the impression of how rates would move at the mid-year renewals for some time, with some dispersion across cedents and lines of business anticipated still.

But stability is largely expected to remain and as a result, returns from capital allocations to reinsurance, be that by reinsurers or insurance-linked securities (ILS) investors, are expected to remain attractive, loss activity allowing.

Terms and conditions are seen as staying stable, while attachments have barely moved.

In fact, we hear from sources that rather than giving back anything on T&C’s, where reinsurers and some ILS funds are being more compliant for cedents, is in offering more capacity for mid to lower layers, in some cases.

So, in being more helpful to their cedents, they are maintaining the main profit drivers, of the elevated attachments and tighter terms that have been installed across the global catastrophe reinsurance market.

KBW’s analysts note that some executives they spoke with are a little more positive on price too, one notable being Everest COO Jim Williamson, who the analysts said suggested overall rate changes between flat and up 5%.

In addition, they notes that some “executives reported modest improvement over the last two or three days, with (apparently unexpected) gaps in a few programs, which could produce modest y/y increases.”

But the KBW team summarised expectations by saying, “We expect post-6/1 summaries to describe low- to mid-single digit risk adjusted rate decreases with modestly expanding terms and conditions and virtually unchanged attachment points, still implying very attractive expected returns.”

It’s a different picture across layers of reinsurance towers and risk appetites, it seems.

“Risk-adjusted rates for lower layers of coverage are broadly holding firm or rising slightly, with modest decreases manifesting themselves within higher layers,” KBW’s analysts explained.

Once again, most executives spoken with noted an absence of material capital inflows to the reinsurance sector, aside from some retained earnings and a few capital raises, which are largely being absorbed by the increased demand for cover that is being seen.

On attachment points specifically, the analysts said, “We were very slightly disappointed – but really not surprised – to learn that reinsurers plan to raise attachment points every few years (one executive suggested three years, versus the roughly seven year period preceding the January 2023 step-change rather than adopting smaller and smoother increases that should better proxy loss trends. We concede that the logistics are easier (it’s admittedly simpler to conceive of a $90 million excess of $10 million than of $94.5 million excess of $10.5 million), but smaller, steadier attachment point increases would probably moderate the pricing cycle and minimize uncertainty for all parties.”

It will be interesting to see if that comes to pass, but encouragingly it does suggest that the reinsurance market has finally absorbed the reality of rising exposure and the need to ensure risk is shared commensurately as exposure increases.

Of course, the June 1 reinsurance renewal has a distinctly Florida and southeast coastal US focus in the main, but most sources of ours suggest that the market conditions seen at June 1st are expected to play out through the mid-year renewal at July 1st as well.

The prospect of still excellent returns in reinsurance in 2024, only slightly less so than 2023, will still be very attractive to investors.

Given the time of year, investors that have not yet deployed capital into ILS strategies (other than well-diversified cat bond funds) or reinsurance are likely to sit it out until later in the year now, given the hurricane season is approaching fast and officially begins on June 1st.

With returns set to remain elevated there is a strong chance that investor interest for ILS and reinsurance grows this year, as even if the hurricane season proved costly, the result of that would be expected to drive rates up higher and faster again, making those excellent returns even more excellent in future years.

June renewals – Slightly less-excellent reinsurance returns ahead: KBW was published by: www.Artemis.bm
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