Property catastrophe market finds balance in H1 2024

Guy Carpenter estimated an additional $35b to $40b in limit purchases worldwide.

The world’s property catastrophe market achieved a healthier balance in the first half of the year (H1 2024). Reinsurers saw recovering profitability and additional capital availability, which allowed cedents to consider purchasing more property catastrophe limits. 

Demand rose significantly across various regions, and reinsurers met this demand, bringing the sector into equilibrium, revealed Guy Carpenter in its latest Mid-Year 2024 Market Insights Update.

From January to July 2024, Guy Carpenter estimated an additional $35b to $40b in limit purchases worldwide, representing a 5% to 10% increase in catastrophe capacity, including cat bonds, depending on the region.

In North America, over 60% of property catastrophe contracts included expanded limits, with the top 20% purchasing over $100m in additional limits. Most of this capacity came from traditional reinsurers, whilst insurance-linked securities (ILS) mainly impacted through catastrophe bonds and investor support for traditional reinsurers.

Entering 2024, significant corrections in pricing and attachment points restored profitability to the property reinsurance sector. 

Reinsurers had increased capital for placements and were incentivized to use it, creating favorable conditions for cedents to enhance their property catastrophe reinsurance levels.

In recent years, net limits purchased remained stable due to difficult market conditions. However, rising inflationary pressures increased underlying valuations and cedents' exposure to loss, leading to a heightened interest in additional limits. 

Greater market stability and moderating prices in several segments enabled cedents to better budget for extra coverage.

Looking ahead to 2025, Guy Carpenter anticipates further momentum for increased demand due to several factors influencing buying decisions, including continued (though reduced) property valuation increases, growth in overall exposure, changes in model versions, and a focus on ongoing risk mitigation.