RenRe CEO Kevin O’Donnell said the carrier estimates that the market loss from the California wildfires could be as high as $50bn and lead to “improving” market conditions for property cat business both in terms of rate and opportunities to deploy capacity.
O’Donnell noted on a Q4 call with analysts that he expects RenRe’s pretax negative impact will be approximately 1.5%, or $750mn, of the event’s aggregate insured loss.
“Natural catastrophe losses are becoming larger and more frequent. Of course, climate change is one driver of this. It is equally true that human behavior is also contributing to growing losses,” O’Donnell said.
Group CUO David Marra said 75% of RenRe’s US property catastrophe accounts are up for renewals over the next six months, and most are loss impacted.
Should the wildfires exceed retentions for many nationwide players or exhaust the towers of some California insurers, some treaty language may allow insurers to treat the fires as two separate events. However, if they can do so, they would need to take two retentions, Mara explained.
“We will be ready to deploy capacity, but only if prices are commensurate with the additional risk we will assume,” said Marra.
RenRe is expecting approximately $10bn in new demand entering into the market this year. However, due to the wildfires, this could increase as companies review their reinsurance needs and purchase backup covers for the remainder of the year.
Executives expect an improving market for property catastrophe reinsurance, with upward pressure on rates and new opportunities to deploy capacity.
CFO Robert Qutub noted later in the call that the carrier meanwhile expects performance fees to be “down significantly” given the impact of the wildfires.
Q4 performance
In its property segment RenRe reported a 69% combined ratio in Q4. This was driven by a 49-percentage point impact from large events, including 42 percentage points from Hurricane Milton. RenRe reported a $270mn net negative impact on overall results.
“We expect volatility in this business from time to time and continue to expect an adjusted combined ratio in the mid-to-upper 90’s on average,” said Qutub.
In its casualty and specialty segment, RenRe reported an adjusted combined ratio of 98% for the year, up from 94% a year ago.
O’Donnell mentioned a few drivers relating to the increase, including the Baltimore bridge collapse earlier in the year and an elevated loss trend in GL lines.
“General liability falls into the category of an underperforming line right now,” O’Donnell said.
The current accident year loss ratio also ticked up through the year as RenRe “prudently” increased its initial loss ratios to reflect trends in general liability.
However, the acceleration in GL trends has been offset by favorable trends in other lines of business such as professional liability, marine energy, cyber and credit.
January 1 renewals
In property, demand increased at the top end of programs, along with competition for attractive placements, Marra noted.
RenRe experienced rate reductions of around 8%, with top layers down and bottom layers down less. Retentions held and terms and conditions were stable.
Marra said he expects to see property cat GWP flat despite rate increases.
“We expect that the recent catastrophe events will increase growth opportunities across our property portfolio and a strong rate environment,” he continued.
In its casualty and specialty space, specialty top line grew 8% year over year to $2.5bn, and executives noted that the specialty market continues to see favorable underlying conditions.
RenRe did reduce its exposure in cyber in 2024, where performance has been strong, but rates are declining.
In casualty, at the January 1 renewal, RenRe reduced the line on some treaties where exposure to loss inflation was greatest.
“There is broad recognition that this business needs to improve to keep up with loss inflation. Insurers made good progress in the quarter by accelerating rate increases and improving their claims handing and defense against an aggressive plaintiff's bar,” Marra said.
RenRe’s stock price declined 8.3% in morning trading to $237.82 per share following the Q4 earnings call.