In his more than quarter-century career as a reinsurance broker representing the mutual insurance market, the January 1, 2023, property reinsurance renewals stand out in Josh Knapp’s memory as a day of reckoning.

Executive Summary

With crucial help from their reinsurance brokers, embattled mutual insurance carriers are persevering through higher property reinsurance pricing and retentions. Brokers and carriers told the story of the reinsurance reset impacting Midwestern mutuals to veteran insurance journalist Russ Banham.

“A fundamental shift occurred in reinsurers’ views of severe convective storm risks, the major peril of Midwestern mutuals,” said Knapp, an executive vice president for Gallagher Re.

Such storms, known by the acronym SCS, contain a variety of extreme thunderstorms, intense lightning, tornadoes, hurricanes, and large hail events. From 2018 through the end of 2022, SCS losses totaled $133 billion in the U.S., 90 percent higher than the prior five-year period, according to Swiss Re. The time to pay the piper arrived the next month for many mutual carriers in the nation’s heartland—much higher attachments at the lower layers of the reinsurance program requiring more substantial risk retentions, in addition to significant price increases.

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