The global insurance group Howden has warned that in an age of increasing global risks, continued headwinds could be expected in 2024.

In a newly released report, A new world, the company said that there were conditions across the insurance and reinsurance markets that reflected the continued turbulence since the turn of the decade that had brought about new realities and reset loss expectations in what remained a highly dynamic risk environment.

In an outlook for the coming year, the report said that from a macroeconomic perspective, the old year ended on a strong note as resilient growth, steeper than expected falls in inflation and moderating short-term yields coalesced to drive a robust rally in financial markets.

It said: “Headwinds are nevertheless likely to persist into 2024. Expectations are for modest economic growth across advanced economies.

“Inflation volatility, climate change, the net-zero transition, civil unrest and war, can be more difficult to predict, and the [insurance and reinsurance] market has a crucial role to play in indemnifying losses when they occur.

“There are also new opportunities to support mitigation and adaptation initiatives by offering risk reduction incentives to policyholders and rewarding positive measures.”

David Howden, the founder and chief executive of Howden, said: “Risks are escalating as the world lurches from one crisis to another. The value of risk transfer comes to the fore during such volatile times. This is the moment for brokers and carriers to step up and apply our intellectual and financial capital to find creative solutions that safeguard the insurability of assets exposed to a myriad of risks, including climate change, geopolitical instability and rapid technological advancements. Offering innovative products that meet clients’ changing needs is the route to long-term relevance and new possibilities.

“Howden stands at the forefront of these efforts by applying differentiated insights and expertise to deliver pioneering solutions. With macro and geopolitical shocks fuelling uncertainty and the risk landscape changing like never before, Howden is supporting clients by accessing new pools of capital and securing the best coverage available in the marketplace.”

The analysis said that January 1 renewals had taken place in an environment of more favourable supply dynamics, but also underwriting discipline, leading to a relatively stable and orderly renewal with supply more than sufficient to meet increased demand.

The Howden document said: “Risk-adjusted pricing saw flat changes overall. Any significant variation by territory or line of business was informed by loss experience.

“Capacity for frequency protection was once again at a premium, but competition further up programmes brought better outcomes. Terms and the scope of coverage were a core focus in 2024, which resulted in improved concurrency overall. Capital inflows supported more favourable market conditions.”

With regard to property catastrophe reinsurance, it said: “Global risk-adjusted global property-catastrophe reinsurance rates-on-line rose by an average of 3 per cent at January 1, 2024.

“This was down considerably on the +37 per cent recorded in 2023. Increased appetite from most markets meant supply was able to meet demand to a degree that was lacking last year.

“The rebound in the ILS market was an important factor as competition increased for higher-attaching layers, which in turn encouraged new sponsors to enter the market. Terms and coverage scope remained largely stable, although there was a notable shift towards concurrency.

“Insured catastrophe losses exceeded $100 billion for the fourth straight year in 2023, indicating an elevated baseline for loss expectations.

“The lion’s share of insured losses were borne by insurers following reinsurers’ structural retreat from frequency risks through 2023’s renewal cycle.”

Tim Ronda, the chief executive of Howden Tiger, said: “Reinsurers were relatively unscathed by large losses in 2023, due in part to more favourable terms and conditions, including higher risk retentions and attachment points.

“Returns are back at equal to, or greater than, reinsurers’ cost of capital. Activity in the lead-up to January 1 was timely and orderly and our clients are in a better position to understand their cost of reinsurance and volatility within their retention. It seems we are in a period where stability is rewarding both clients and reinsurers.”

David Flandro, the head of industry analysis and strategic advisory at Howden Tiger, said: “Dedicated reinsurance capital has recovered to near record levels. Generationally strong pricing, favourable terms and conditions in key lines of business and pursuant, higher returns on capital have enticed capacity back into the market through multiple channels.

“This, combined with a rapid recovery in traditional balance sheets, has meant there was excess capacity for some placements. The structure of the reinsurance market continues to change, with alternative capital now comprising nearly a quarter of the total.”

• For the Howden report, A New World, see Related Media

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