Gallagher Re finds Florida risk-adjusted interest rates flat or down 10% on mid-year renewals

According to Gallagher Re’s latest biannual insurance renewal report, Florida’s weakening market leveled off and strengthened as available seats dwindled in late June, ultimately causing risk-adjusted rates for most programs to remain flat or even decline At 10 o’clock%.

The report indicated that programs completed in early May provided ready availability of capacity, with many reinsurers looking to implement increased capacity in programs.

The broker noted that this dynamic changed closer to June 1 as ILS capacity became limited due to ILS investors’ “concern” about the forecast of an active hurricane season.

In addition, Gallagher Re highlighted that the expected catastrophe bond capacity in the Florida market proved to be insufficient in May, which resulted in increased demand for capacity in the traditional market.

Additionally, the report also indicated that contingent participation capacity for catastrophe coverage in Florida increased due to increases in primary rates and recognition of improved loss rates resulting from legislative reform.

Turning the focus now to the US real estate market, the broker explained that the consensus in reinsurance markets is that after two years of significant increases, real estate rates are now sufficient to maintain long-term profitability.

The company saw its ability to respond to catastrophes improve significantly, primarily due to a combination of profitable underwriting results and strong retained earnings.

However, Gallagher Re added that the supply of properties per risk capacity remains lower and the sector continues to struggle with valuations, inflation and the impact of secondary risks on risk exposure.

Additionally, valuations received for U.S. real estate showed reinsurers attempting to maintain the profits made over the past several renewal cycles, with most amounts offered flat or increasing in the mid-single digits on a risk-adjusted basis.

Gallagher Re also noted that a number of large carriers have decided to increase their total Cat XOL purchases, purchasing an estimated $5 billion of new capacity.

The Gallagher Re report also explains that buyers of property catastrophe reinsurance were able to negotiate better terms in 2024 due to the “risk on” approach taken by reinsurers. More information can be found here.