Insurers are challenged by the reinsurance market in 2024. Reinsurers have been raising their rates, seeking higher attachment points, pulling back from aggregate cover, and offering stricter terms in conditions. This, in turn, has led to insurers retaining more risk, raising rates to cover reinsurance costs, or both.
In personal insurance lines, consumers have been self-insuring if they can afford to, switching to less-expensive coverages with less protection, moving to geographies with lower insurance rates, or, in some cases, going without insurance altogether. While conditions have eased somewhat, higher reinsurance costs and greater retained risk still challenge primary insurers’ profitability. External factors remain problematic, with 2024 expected to have an active hurricane season. Losses from secondary perils remain volatile, though modeling is improving.
Casualty lines are stable, but concerns persist about adverse reserve development, social inflation, and litigation funding.
In the life reinsurance sector, incumbents focused on mortality reinsurance face competition from offshore entities offering annuity and asset-intensive reinsurance as well as legacy business transactions.
Primary insurers can’t completely eliminate their need to mitigate their own risk exposure, but they do have options that can help them address rising reinsurance costs through technology and operational optimization. These include enhancing risk modeling, managing books of business proactively to adjust their risk profiles, leveraging third-party data and analytics for risk and book modeling, and establishing dedicated reinsurance software support. Modern reinsurance management systems offer improved access to accounting and claims data and granular APIs that reinsurers can access, increasing insurers’ ability to reinsure internationally. Poor data access and quality with existing reinsurance management systems is one driver of higher reinsurance rates.
Generative AI is another technology insurers can leverage for both claims and underwriting to reduce their reinsurance costs, whether through improved risk and book modeling or through better claims adjudication and claims fraud detection.
Insurers that embrace innovation will not just survive but thrive.
If you’d like to discuss how insurers can address reinsurance costs, please read Reinsurance Market Challenges in 2024, or contact me at [email protected] or Mitch Wein at [email protected].
