Muted London market appetite for US CAT in 2023: Howden

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The London insurance market has a muted appetite for US catastrophe risks in 2023, according to data from a survey undertaken by international insurance broker Howden.

The annual London Market Appetite Survey from Howden assesses the underwriting appetite of London market insurers by line of business, providing an outlook for 2023.

The survey of 43 insurers in the London market was conducted in December 2022 and respondents were a mixture of Lloyd’s syndicates and company markets, the broker explained.

Survey respondents are asked to indicate the degree to which they plan to grow, or shrink, gross written premiums (GWP) by line of business.

Overall, Howden found the survey results reflected the volatile global environment, as well as the impact of catastrophe losses on insurer appetites.

Paul Cumberland, Executive Director, Howden Markets Consulting commented, “With the relatively modest rate increase anticipated for next year across the market place as a whole, it is tempting to think that we are now in a ‘soft market’, however really it is the rate of rate increase that is slowing and that many classes are peaking in terms of rate adequacy.”

Both North American Property and catastrophe lines of business have received muted scores, Howden highlights.

The broker explained that, “2023 sees the appetite for North American property remain as muted as it was the year prior. Rates, however, are expected to increase by an average of 14%, with some carriers even predicting a 30% rise.”

While on the catastrophe exposed side, “For US CAT business, respondent appetite is equally as muted with an average estimated RARC (Risk Adjusted Rate Change) of 50% for 2023.”

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Just two of the insurers surveyed indicated they have a high appetite for US catastrophe risks, which Howden said could suggest they are “potentially looking to take advantage of favourable pricing conditions.”

Perhaps unsurprisingly, appetites for US catastrophe business was lower for open market players in London than for MGA’s, with the delegated authority segment expressing a higher appetite for US cat risks than for international (the open market being the other way around).

The survey reflects broader appetites in reinsurance markets for these key lines of US property and catastrophe exposed business, where reduced capacity has been partly due to outflows, but also reduced appetites among some players.

Of course, this survey took place late 2022, so appetites may now have increased in-line with the rising of prices at the January renewals.

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