For the last 2 years, the Power market has been through a phase of correction or hardening. This has been both in terms of adequacy of rate and also terms and conditions. The early indicators for 2024 show that this phase of the market cycle will continue but we would expect that the pace at which it does will start to show signs of slowing down. The aggressive nature of the correction will not continue to the same degree, but the marketplace will continue to be challenging.

After the January 2024 Reinsurance Treaty renewals, the absence of a peak Wind event in the Atlantic/Gulf has led to what is being termed a “more orderly” 2024 Treaty renewal season, with more capacity coming into the Treaty market. Despite this, the Power market still remains exposed to a number of different issues which may lead it to look to maintain the status quo for the immediate future.

• Loss activity has continued over the course of 2023. The figures for 2022 look to be in excess of USD 2Bn and whilst early to say, 2023 looks to be heading in the same direction. Therefore, there still remains an overall focus on flight to quality but with very different approaches being taken dependent on the characteristics of each specific risk.
• Global inflation is still an issue, but the push made by Insurers to ensure that clients are reviewing the adequacy of their values now seems to have reached a point of equilibrium.

Supply chain/lead times remain a real concern with the business interruption component of losses a clear area of focus. Almost every customer is exposed to this to some degree. In a world still recovering from a global pandemic and also affected by the movement of goods, the repair and delivery time for large/complicated items of machinery and equipment has extended enormously.

Catastrophe exposures remain an area of concern (and cost) to Insurers. The availability and willingness to deploy Cat capacity in critical areas will remain an issue. In 2024 this won’t only be in the traditional territories associated with wind and earthquake but also other areas of world. For example, Latin America is forecasting a higher than normal El Nino phenomenon and could see drought conditions affecting the productivity of the Hydroelectric plants.

Insurance capacity for Power remains theoretically high, with no major exits in 2023. There has been some new MGA capacity appear in 2023 both in London and overseas and Tokio Marine HCC will also take a more meaningful position in 2024.

However, there still remains a relatively small number of markets who would classify themselves as Leaders. This means that there is unlikely to be any significant degree of market disruption in the immediate future. Indeed, the market remains the antithesis of a subscription market; with every market offering their own specific pricing for their participation. Dependent on order size, this can have the effect of diluting initial pricing offered by lead markets.

We have also seen the interest and demand for Parametric products increase over the last 12 months; most recently in Turkey which has been impacted by cost and availability of capacity. This is clearly a sector that has become more widely understood and competition in that space has led to this so called “alternative product” become more accessible.

One area which remains unaffected by market direction is Coal. As we have seen from the recent COP28 conference resolution, there is broad global agreement to a transition away from fossil fuels.

There are many parts of the world which remain highly reliant of coal fired power plants and in this respect, it remains our job to support them towards the transition to renewable energy which in most cases is the long term goal. Notwithstanding, available capacity for coal remains limited but working closely with the market continues to find solutions for many of our coal clients as they move closer to transition.

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