Renewals are done, and all through the town, reinsurance people are merry.

“What a difference a year makes”, writes one broker on LinkedIn, accidentally quoting their competitor’s report title whilst presenting their own.

A palpable sense of relief permeates: 2023 was a year with no black swan reinsurance events.

Not least because of a spectacular transition of the reinsurance market’s own.

Ugly ducklings

Tragic loss of human life and destruction to property remained centre-stage in 2023.

With earthquakes, fires and floods around the world, nature reminded us of her potency during the hottest year on record.

Humans have proven just as lethal to one another, in a growing number of conflict zones.

Yet the reinsurance market has long since changed its feathers.

Gone is the white swan of Lohengrin, the hero available everywhere for every need.

Following its own hour of necessity, the black swan took charge and aggressively re-established its boundaries.

Royal birds

Freshly billed as a black swan market for black swan events, reinsurance hoped to regain its grace amongst investors.

Accepting its former role as a cheap panacea for the insurance market was unsustainable, the market underwent a frantic reinvention.

No longer a dustbin for all risk, reinsurance underwriters would become fine dining connoisseurs.

Anything short of Armageddon – including so-called secondary perils, such as wildfires and severe convective storms – would be politely refused.

Returning to the lake in 2023, reinsurers made a swan-like hard landing.

The cygnet rings are back on.

Flight to quality

With choosier reinsurers, not all lakes have proven able to attract swans.

Sometimes this is due to the way wetlands are governed.

In California, the fish are simply too small to justify the trip, having been refused a more nutritious diet.

In Florida, pollution has been a long-standing issue. However, a major clean-up operation – assignment of benefits reform – hopes to curb the dumping of hazardous waste and lure back reinsurance partners.

Yet some morsels remain too suspicious for even the bravest birds to swallow, suggesting further cedent insolvencies could be on the horizon.

Without reinsurance coverage, they will be fish out of water.

Cat ponds

Other bodies of water, such as the growing cyber market, face the challenge of attracting swans for the first time.

Many traditional reinsurance birds remain cautious, unable to see whether alligators lie waiting beneath the surface.

Accordingly, locals have turned to alternative methods, throwing cat bonds into the water like fishing nets, at an enthusiastic rate.

But compared to swans, they are less effective hunters: harder to aim, and harder to re-use in the event of a second fish.

Swan lake

The number of fish and swans seems in balance, for now.

Few cygnets – or even eggs – have been laid, and even with nets growing in popularity, the danger of overfishing seems far away.

Experienced swans remain hungry, if selective, in water that remains rather murky.

Their appetite for good fish has increased; with the most attractive cedents oversubscribed at renewals, in stark contrast to those unwanted.

In a data lake that seems ever-dirtier, it falls to buyers to demonstrate that they swim in clean water.

Still water

One friendly (re)insurance journalist recently put forward that 2024 would be less characterised by macroeconomic events than prior years.

It feels like a bold claim – but having ctalked with reinsurance execs on the yacht at Monte Carlo, at Leo’s in Baden-Baden, and in the thick of renewals in Bermuda – this author is inclined to agree with them.

At least in part.

Certainly, it feels as though no black swan event is about to knock us off our feet once again, as the global pandemic did just a handful of years ago.

And at least to some extent (underwriters will always argue not enough!) the market has priced-in fundamental changes to our expectations of risk.

Grey swan events

But perhaps that is just a shift in mentality after coming to terms with the upheaval of the past few years, and revising our expectations for future volatility accordingly.

You can certainly get your fill of grey swans – the known unknowns – and not want to consider anything worse that might happen.

Especially given one would have to add the consequences of a black swan event to a world that manages $100bn in annual insured losses quite comfortably without one.

Even if mega-catastrophes are on balance, unlikely; the world feels poised for potential upheaval.

Exactly how unlikely remains the rightful concern of the reinsurance markets.

No luck catching them swans, then?

It's not just the one swan, actually.

2024 begins as an El Niño year, suggesting nature will throw its own hand grenade into the mix, at some point, somewhere.

Already, there is no obvious end in sight to the conflicts mentioned at the start of this article.

The world’s most pre-eminent manufacturer of computer chips may face turmoil, at a time when AI is undergoing its own revolution.

And amongst it all, countries representing more than half of the world's population will be going to the polls.

Like swans, we reinsurance people will do our best to appear calm and graceful – in pursuit of 'orderly' renewal seasons, come what may – but rest assured, those feet will be paddling frantically under the water.