Good day, ladies and gentlemen, welcome to Conduit Holdings Limited 2023 January Renewals Trading update. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session through the phone lines, and instructions will follow at that time. Participants can also submit questions through the webcast page by using the Ask a question button. I would like to remind all participants that this call is being recorded. I will now hand over to Trevor Carvey, Chief Executive Officer, and Greg Roberts, Chief Underwriting Officer, to open the presentation. Please go ahead.
Okay. Good morning and welcome to this trading update post the January 23 renewal season. It's quite something to think this is already our third renewal season. When we put the original plan together over 5 years, we obviously made assumptions around the way that the market would expect to unfold in the world of the plan. As we know, the market never fails to surprise in that respect. We all said that we wanted to build a business that would be able to respond quickly and proactively to market events, and we can talk you through some of the actions that we've seen over the course of the last 8 weeks or so. I think we probably demonstrated that, you know, we're in a good place to be able to do that. Market background.
Next slide, please. Thanks. Market background. I won't dwell on this too long. A lot of people on the call will know the background to the industry changes. I think the key point for us is that it was a structural shift in the marketplace. Three main drivers of that are listed up there. Obviously, the increased inflationary environment, which is still ongoing, that really is structural, particularly on the longer tail lines from a bottom up. Nat cat events, obviously there were several major ones during the year, but also as a reminder here of just the attritional cat, if you like, that ran through and delivered north of $115 billion of insured losses through the year. That's just obviously a big driver of what we saw at Jan one.
Just a final reminder at the bottom there, it's not all about Nat Cat. Man-made losses, as we refer to them, do have a big impact on the industry, and particularly the shock of the conflict in Ukraine is a reminder of just how significant that can be and just the degree to which reinsurers and insurers need to keep their defenses up around those type of events. That, again, was a big driver, as you'll see when we come to talk about our specialty segment. Next slide. Some headline numbers, and again, you will have seen these narrated in the RNS, but it's basically a tale of the tape, if you like, around the Jan 1 renewals. Great result from the team.
$421 million, ultimate premium written, which is 60% up year-on-year. That certainly puts us ahead of our original five-year plan, where we were expecting to be by the time we got to year three. It's a great result from the team, and we'll give you some color as we go through the different sections of the presentation and also where that has flowed through across the different divisions of property, casualty and specialty. A word on property and specialty. We said quite some time leading into the renewal season that, you know, that's where we saw the main opportunity. Property predominantly followed by specialty. That's where that growth has largely come from in our portfolio, and it's where we focused our efforts.
It's where we knew the rate and the upticks in terms and conditions in our favor were going to be. I think the team have done a great job of ensuring that we've not only evaluated prudently those classes of business, but also continued to seek out, through our distribution sources, a wide band and spread of business within those two segments. Quick word on casualty. Good growth. I mean, it's a risk-adjusted rate change of 1%, and Greg will talk more about the rate changes and some of the mechanics around that in a while. Casualty for us has been a really stable book of business. We spent 2 years building that up, seeing an enormous amount of submissions, and we are sitting behind there alongside some really solid industry players.
It's all about knowing the entity that you're partnering with, the level of the data they provide you, and how that is being managed by them. We have great transparency on those accounts that we write. We still see an awful lot that doesn't make our hurdle on casualty, but year on year, a 1% risk-adjusted rate is fine by us. It shows that the underlying clients are still staying ahead of what we call the underlying, like attrition inflation and the claimed inflation drivers underneath. They need to stay ahead of that. In the main, I think we see that the industry and our clients are acting responsibly in that respect. Greg has more coming up on kind of a high level, comment around the classes.
Just before we move on to that, and the rate changes, just a word around our outwards reinsurance. A comment here that we have an expanded panel and we bought expanded limits. That's important because obviously we're growing the account. We operate with key tolerances around particularly our net PML, the way in which the such as Ukraine, man-made losses, but obviously also the large Nat Cat event. Our retrocession program is predominantly placed at Jan 1, so a lot of work was done in securing that placement. Our style on that is to sit down with the participants that we have, find out what is driving their needs and wants, and essentially put together the program around what we know that they want to sell, and that's key.
I think Greg often uses that expression. There's no point trying to force coverages into negotiations if there's a resistant party. We've done a very good job, I think, of building that panel out with expanded participants. Again, it's there to secure around our long-term tolerances that we set out in the original five-year business plan. Couple of comments at the bottom on ratio. This is trading update based around, you know, obviously our the experience of Jan one. So we won't be going into great detail on ratios, but we have reaffirmed there our previously stated comment around the mid-80s combined ratio, and the business is certainly moving in that direction.
Really pleased with the way that, also not just on the underwriting side where rates move, but obviously as we're building scale, the cost and the operating expense of running the business becomes a much more manageable component. What is relevant to us though in this renewal update is acquisition costs. As we flagged there on renewed business, we saw reduced acquisition, particularly on the property and specialty lines, and that's really where this comment is driven from. In those areas, particularly around quota share, where we are in a more of a leading or driving position, we're able to negotiate and reduce acquisition costs on a considerable number of contracts. That went through on the new side as well.
When we saw new business, we were able to bind those at probably lower terms than would have it's been expected a year ago. Again, that helps in the build-out of our business and our combined ratio targets. I think that's enough on the overall sort of general comments. Just move on to the next slide, please. You've seen these numbers in the RNS. The basic driver, as we said, was property and specialty focus. It's where the opportunities have lain for us. Property now 47% of the Jan 1 business versus 41%, largely to be expected with the growth that we've seen in the rate and in the degree of new business that has flowed through.
New submissions that we've seen there have helped to build that account out. Specialty at 26% is like for like obviously in percentage terms, but when you consider that the overall pie has grown from $262– $421, that growth in specialty premium is not insignificant. We obviously were aware post Ukraine of the re-underwriting, shall we say, the specialty market was going to have to go through. Unbundling is the word that's often used. We saw a large number of submissions there that fell into our window a year ago. They wouldn't have because simply the contract forms were too opaque. Now with transparency, we're in a position where we can underwrite those we believe and that accounts for the growth largely in the specialty.
We had a couple of strategic deals as well that we've written that gives us access to a broad base of specialty business through Quota Share transactions. That's, I think it's showing that, you know, we recognize it's the time to expand capital deployment in that space. That's essentially what you see through the cash specialty. Casualty I've touched on already, even though, as I say, you know, there's 1% risk-adjusted rate and the client base is fairly stable, we were still able to increase our shares on those that continued to meet our Hurdle Rate, there's a degree of new business in the casualty account, largely that's being able to increase on some existing participations. Probably just one final word on this slide.
Just around renewal and retention ratio, we have discussed a number of times with on these calls through 2021 and 2022, about the degree to which business is relatively sticky, and then that's maintained through the renewal season. It's around about 85%–90% what I would call renewal rate. Business from policies that we wrote a year ago, 85%–90% of those have broadly been renewed. It's showing that we didn't have a major exercise of having to clear out or re-underwrite whole swathes of the portfolio. We were pleased with the direction of travel, and we're able to scale up our lines on a number of those. Okay, next slide, please. I'll pass over to Greg on rate change, I think it is. Yeah.
Morning, everyone. I think these numbers are already visible via the RNS, et cetera. First comment here, I mean, it was another late renewal season
For the market. Slightly different reasons to last year, as is the case. It's important here that, you know, some of the delays that probably experienced with others with uncertainty as to risk appetite, et cetera, I'm very pleased to say the team was benefiting again from being, you know, in one location, one team sitting together, and with our sole focus being looking at reinsurance risk without the distractions of other interests like running an insurance business, et cetera. We were able to be highly efficient in our ability to look at risk and look at opportunities. Another point to note is a lot of this business was already evaluated in prior years. We've talked very heavily here, and we talk here about rate and the repricing of risk.
You know, a lot of these business opportunities are from good, strong clients who have great underlying businesses, are very successful in their own, in their own practices. We historically might not be able to find margins. Really valuable to have, you know, put significant work in in prior years, to evaluate and understand the business and then have it represented in, you know, the terms of 2023. Which when we contrast 2023, 1st of Jan to 2022, you know, our approach to valuation of CAT, et cetera, has not changed. We spend a lot of time thinking about how we give access to CAT support alongside non-CAT premium.
We've talked historically and reported through 2022 about our ratio of CAT premium to non-CAT premium of roughly two-thirds of non-CAT premium to CAT premium. That philosophy and risk appetite hasn't changed. When we think of the Quota Shares, we were able again to continue to restrict the tail risk that sits inside those. We've talked historically about the management of event limits, et cetera, and our ability to reduce those further. As we saw the Excess of Loss market, and of course, lots of the reporting is largely around property XOL and specifically CAT, it is the case that property CAT experienced very significant rate increases.
You can see here when we talk about our risk-adjusted rate changes across property, casualty, and specialty, property is most definitely dominated by pure rate pricing, and in property XOL terms, Rate on Lines shifted significantly. Typical behaviors of clients were to retain first layers, for example, buy more limits, and there was still, you know, multiples of the expiring premium on the contract for 2023. That's great from a discipline perspective. It shows better alignment of interests. Clients are have, you know, more skin in the game, to use that phrase. Specialty, when we look at the +14, bigger components of that is gonna be terms and conditions. That was a market where the type of product changed and what was sold changed.
The coverage that was sold changed significantly. As Trevor referenced earlier on, you know, that is not only a reflection of general hardening, but loss experience as well. Noting that the Ukraine, for example, was a significant impact to the specialty market. Casualty, we see a +1 here. That's a mix of terms and conditions and business change. We saw some good pressure on cedes and the management and the maintenance of combined ratios that remained attractive. Cedes had to give, I think, in certain instances. We saw in fact, in some instances, removal of coverage. Particularly where reinsurers and the sellers and buyers might not have been able to agree on the implied margin of a particular subclass.
There are examples where clients were comfortable in retaining components of that, and that's really good again for discipline as well. Again, on casualty, you know, just to stress the point again, lots of opportunities there and, you know, some really great business opportunities, good partners. You know, as we've said in the past, often our most common hurdle is our agreement on the inflationary pressures that those books are under, and that often restricts our ability to support these programs. Next slide, please.
Thanks, Greg. Yes, so this is actually the final slide. Just a few words before we move to Q&A. Just, we've used the word a number of times, structural shift in the marketplace, and I think that is genuinely what we saw.
There's no doubt that the inflation that's been emerging through is being recognized by the client base and being recognized by reinsurers. On top of that, you then put the stresses and strains of the CAT events and the large events through the year, to market impact on impacting reinsurers' equity levels, and that's the situation that we find ourselves in the market. It's been a rough ride for the industry and the market, but it's a great place for us to be in. Well, I've actually referenced here again the fact that the legacy free balance sheet that was a feature, I think, in our ability.
Engaging conversations promptly and efficiently and early in the renewal season with clients. We weren't in a position of having to unwind previous positions and exposures, and that became more apparent as the renewal season went on. We were presented with a number of requests or submissions where in the industry there were some overhang and positions had been built up that were having to be, if you like, laid off before those participants could then proceed into the new market. I think it was just a feature for us that it really only struck us kind of as the renewal season was developing, that we were able to deploy because we're still growing into our skin, and that's kind of the way that we like to think about it.
Then, finally, the Q&A that will follow now, I'm happy to engage in that. Our, our year-end results, as we've already publicized, will be out and we'll be back online 22nd of February 2023. Happy to take Q&A now. Over to you, Antonio.
Thank you, Trevor. Maybe just a quick reminder before we go into Q&A. Obviously, this session is dedicated to the January renewals, so very happy to answer questions on January renewals. Any questions on financials 2022 will be answered on the 22nd of February. Thank you.
Participants can submit questions in written format via the webcast page by clicking the Ask a Question button. If you are dialed into the call and would like to ask a question, please signal by pressing star 1 on your telephone keypad. We will pause for a moment to assemble the queue. The first question is coming from Tryfonas Spyrou of Berenberg. Please go ahead.
Hi. Good afternoon, everybody, and good morning to everyone in Bermuda. Two questions from my side. Obviously, a very strong renewal for you guys at 1/1. That seems to be quite strong. I was wondering if you can give us a helicopter view on your expectations for the remainder of the year in terms of what part of the market do you think will become even more attractive, both in terms of business lines but also maybe geography, presumably sort of areas you're looking to deploy more capital. The second question is on casualty. You indicate obviously that parts of this market are still attractively priced. Can you maybe indicate on which sort of subclass of casualty fall within your Hurdle Rate and which don't?
I guess a side question to that is, risk-adjusted rates seem to be sort of relatively flat, maybe slightly up. Same time, inflation expectations looking ahead seem to be still quite high. Do you see any risks here for the market? I guess there's some participants that talk about high investment income and high discount rates, looking to sort of couple those with casualty. Maybe any comments on that would be, again, appreciated. Thank you.
Thanks, Tryf. Greg, do you want to take the first.
Yeah, sure.
On geography and the year unfolding, and then I'll.
Yeah, sure. I think as we've said before, you know, casualty is a very, well not linear, but it's quite progressive through the year. It's less 1/1 driven. It's obviously less sort of geographic in the nature of the peril. Specialty is probably a little 1/1 heavy compared to the other classes. We still believe that there are likely to be developments from activities and losses in 2022 that will influence what happens in the specialty market through the rest of the year. It's kind of a sensible thing, given the delta in reported Ukraine losses versus the narrative on the industry assumptions. I think there are a few factors still to play through there from specialty opportunities.
Property is, you know, well-trodden renewal phase, sensitive to geography and perils. Mid-year, June, July, always highlighted by some North Atlantic windstorm trades, particularly Florida, very big in June. March is obviously the big period for the Japanese renewal season. There'll be a lot of speculation, I suppose, on the rating environment for Japan, given what's happened in the U.S. and Europe at 1/1. I think the point to note here is, you know, Japan are very big buyers of Excess of Loss CAT reinsurance. When you factor in an inflationary environment that has now ticked through to positive, you know, there's probably a connection there with the need to buy more limits as well.
Again, you know, thinking of supply and demand, those are all sort of basic factors that will flow in there. Yeah, I, you know, lots of moving parts for the year ahead, for sure.
Thanks. Just comments around the casualty. I think you were highlighting at the end there around the impact of interest rates and the discount factor. Probably just cover that off to start with. That is a feature which we discussed internally here and just the presence and whether that would start to emerge in rating models. We don't embed that in our pricing for casualty, so our casualty pricing model is what I would call a more pure model. It is particularly prevalent in classes such as motor. I think there's been some talk, sort of more in the industry of seeing the discount rate being embedded into the motor type models.
It's not a class that we transact, but I think that may be something which does start to emerge more and more, which would impact pricing on those, more, minimal margin lines, shall we say. Just in terms of some of the classes, just as examples, you know, the likes and the dislikes, classes like, third-party liability, excess third-party liability, that is, and general third party. If you like to think of it as reinsurances of the Fortune 1000 big commercial enterprises, that's had a very strong uptick. We still like that class. The limits that have been provided in those, like, those policies over the last 3 and 4 years have been compressed significantly, and that still offers opportunities, even though the rate of increase has fallen away.
At the other end of the spectrum, classes like public D&O, we don't have a big exposure to that, but again, that's seen a big drop-off in the industry in terms of rate. Probably holding its own in terms of conditions, but in terms of pure rate, it will probably start to fail more than others in meeting our hurdle. You have a large middle ground, which we evaluate on a case-by-case basis. Some we match and some we don't, and that's kind of the professional lines, management liability, professional liability, and the financial lines. They still hold their own in the main, but it's very much a question of who's underwriting on your behalf.
As a Quota Share reinsurer, you really need to get into the weeds as to how they're performing that analysis, which I'm pleased to say they share more and more. Yeah, I hope that gives you a bit of a sense and a bit of color around the casualty.
Of course. That's great. Thank you. Very helpful.
The next one is from Andrew Ritchie of Autonomous. Please go ahead.
Hi there. Congratulations on the renewal. First question, I mean, Trevor, you're very well respected and been around in the industry for some time in previous renewals like this. Are you not seeing any sign of new capital entering, or have you had opportunistic approaches from capital suggesting things like sidecars, et cetera? I'm just trying to get some perspective as to whether there was any shift at all, or any sense at all of any new capital entering as the renewal progressed, or would you expect signs of more capital entering, particularly now, particularly ahead of 6/1? I'm just trying to compare and contrast with previous episodes on the capital influx or lack of in the industry.
Second question. Apologies if I missed this. I got on the call a bit late. What did you say about the shape of your property exposure in terms of the layers where you're participating and the overall exposure in terms of where you're sitting on PMLs? Have you moved up or more materially shifted in terms of typical attachments? Thanks.
Okay. Okay. Thanks, Andrew. Yeah, I'll handle the capital question and then Greg, you pick up on the property. No, you're right. There's no doubt that obviously as the year unfolded, there were significant departures from the, from the scene as it were. I think, you know, if you look back to what we saw through the 1/1 renewal, there was actually limited new capital that came in our experience. There were some capital raises from some incumbent carriers through 2022, but in the scale of things, that really hasn't made a dent in the kind of supply, demand, you know, imbalance.
You know, in terms of where we are and how we see it, I think there will be through the year increased interest in particularly the property CAT space, largely because, you know, looking at previous years, as you say, you know, we've seen it in the past, there's a lower hurdle to entry there. You know, you're not having to set up that rated carrier, and the rated carrier is really there to service the business that is beyond the one-year term. That's why, you know, we have a lot of traction on the specialty and Quota Share and obviously the casualty lines as a rated carrier. That's not something that the alternative entrants can easily get at. Best way to think about that.
I think probably that with the attraction of mid-year rates that probably, you know, Greg will talk about in a moment, probably around things like Florida, I think you will see that coming in to the cat space. Possibly also the retrocession. At the back end, there's an element in the industry where the tail does wag the dog, and we've seen probably a bit of additional capacity being made available at January renewal, very, very late in the day around the retrocession product, as a probably an aversion still to U.S. Wind, but there is an increased interest there. Yes, I think I see it probably as a trend, but I don't think, A, it will be enough to make a significant dent in the supply-demand imbalance that we see.
I think it probably will largely be related to those areas of property CAT where, you know, non-rated carriers can enter more quickly. Greg.
Hi, Andrew. Our underwriting philosophy to, when we're talking cat here, when we talk about PMLs, I suppose, you know, hasn't changed. Where we deliver cat capacity via Quota Share, our philosophy and approach remains that we're very conscious and part of our initial interaction is a lot of conversation and development around the management of the tail. The use of event limits and aggregate limits, peril restrictions, et cetera, on any Quota Share we work on. The Excess of Loss is an interesting area at 1/1 that a lot of movement and behaviors by buyers, you know, best exampled by at one end of the spectrum, the sort of nationwide U.S. carriers, you know, who are buyers of big limits.
Clear evidence there that the commoditization of CAT meant that there were what we call capacity pricing. There were minimum rates on lines to clear limits, regardless of how first loss the risk was. You sort of work backwards from there effectively. That was a good sign. Probably observed the same in Europe. Bit of a switch between regional and multi-country. Again, the multi-country buyers are the buyers of bigger limits, bigger programs. Saw more evidence there of peril specific buys. Instead of the all perils, you know, fully broad contract catch-all type approach, it was much more specific, you know, European windstorm only or European earthquake coverage at a level.
In the U.S. Going back to the U.S. on a regional basis, I think I mentioned earlier on, sort of good evidence, good discipline and easier to confirm alignment of interest between a buyer and seller of reinsurance. When you see the buyer retaining first layers, buying more limit, so buying taller programs, attaching as a higher attachment point, again, very excess of loss comment here, with more premium on the slip. All those things have widened the ability.
Thanks. Sorry, you're not able to sort of say on average, you know, we would have attached a typical this kind of return period and now the portfolio attaches at this return period. I mean, is that just it is very hard to say?
Yeah, no, we don't comment on that, yeah.
Okay. That's very helpful anyway. Thank you very much.
The next one is from Abid Hussain of Panmure Gordon. Please go ahead.
Oh, hi. Morning, all. Just a couple of questions from me, if I may. Firstly, just trying to get a sense of this renewal season in the historical context. Trevor, I suppose really it's one for you. I know you have experienced a number of renewal seasons. I'm just wondering how does this one compare with previous hard market cycles? If there's anything in particular you'd like to call out. Then, just sort of related to that, at what point do you think material levels of capital starts to come back in? 'Cause we're seeing significant risk-adjusted rate increases. That's the first question.
The second question is, given the strong rating, the Ts and Cs, the favorable environment, do you anticipate bringing forward the five-year business plan or are you mindful that you need to write business in different cohorts, you don't wanna be overexposed to any one particular year? Just some color around that would be helpful. Thank you.
Okay. Okay. Thanks very much. Just around, you know, the history of renewal seasons and, I think as I was saying to somebody the other day, this is actually my 40th renewal season. It's quite a salutary thought when you think about it. Actually go back in the depths of time. I have to recall actually what some of them were about. Well, ones I can do at 92 obviously strike quite a strong chord, Florida-related, CAT related, and really the start of the, you know, the CAT, if you like, more technical approach to the business and the industry. That was kind of, you know, that's a long way ago.
I'd probably draw the similarity here probably most strongly in my career with back with the post 9/11 '02 renewal season then in January. It was one when, you know, we used to use the expression, the rising tide lifting many boats. It really was Jan 02 and through that year, the classes through like terror and political violence and aviation and property and casualty all lifted up. That's what we're seeing now is a strong awareness structurally within insurance carriers, i.e. our clients, of the need to get it right at their front door. As a reinsurer, you take comfort from that. We look through into their world, get good granularity as to what is improving, what is moving, and the rate at which they're improving.
That's key to how we think about deploying capital and increasing or decreasing our exposures over time. Which probably takes us into the second point. You know, yes, we have a five-year plan, premiums scaling up over that, five-year period, but we don't really think of it as the cohorts that you perhaps alluded to. If the business is here now and we're able to deploy that capital and still keep the balance in the portfolio, and that's the key piece.
You know, we will be a fan of increasing the size of the pie at an earlier point, as the market improves. It's key in our capital metrics and the way that regulatory capital works, that we keep that balance between the different component parts, the short tail, non-CAT risk, CAT risk, and then the longer-tail casualty related business. All of that forms part of the, in fact, the management controls around building the business out. Yes, you see periods like this at Jan one when property and perhaps CAT ex tail has come to the fore, but you increase that in the context of what we're doing elsewhere. In the main, no, we're not breaking into five-year chunks. If the business is here now and we think the returns are there, then we'll be looking to accelerate that deployment.
Super. Thanks. That's very helpful.
The next one is from Andreas van Embden from Hunt. Please go ahead.
Hello. Good afternoon. Just had a few questions around the property book, if I may, please. First of all, is it possible to isolate the property rate increase between the rate increase you achieved on your property CAT exposures and the rate increase on the non-CAT property side? On the non-CAT side, could you sort of highlight how property Quota Share is repriced versus property Excess of Loss? The second question is, again, around your property book. Would it be possible to give an indication what the internal IRR is, the return on that property CAT portfolio in particular on the running year 2023 as at 1 Jan, compare that to last year? How significant is the improvement in the return on those property CAT exposures? Thank you.
Okay. Do you want to talk about the CAT and non-CAT and give us an example?
Sure. The CAT and non-CAT. The non- you know, the non-CAT component is still directionally moving forward. You know, inflation is a big part of this. Rising values, exposure increases. If the concept of having a fire at a single location, business interruption, the values, the protection of the values at a property, thinking of stock, et cetera, inventories, those are all rising, and those are all pressures to increase the requirement for insurance coverage. Those exposures are growing. You know, there are sidebars that go with that that are interesting. If you think of a higher value of commercial value, a propensity to protect that increases as well. There's a nice correlation there between loss mitigation at the same time.
The value of the product goes up, plus the behaviors and around loss mitigation tend to improve as well. All those strike for an attractive place to assume business from with the backdrop of continuing rate increases, because ultimately, there's still a supply and demand concept going there with insurance. You know, the CAT component there goes, we've talked about that and the drivers of what's going on there. Now, the key here is how the product is delivered, Quota Share versus Excess of Loss. You know, the Quota Share for us typically is a tool for us to assume non-CAT business. Then we can moderate how much CAT can be offered through that with, you know, mechanics such as event limits, aggregate limits.
In fact, we use other tools such as inner aggregates and sublimits for perils and specific coverages. All those combined really are, you know, a combination of levers that allow us to sort of customize the product to fit well for the needs of the buyer, but equally satisfy the controls we have around risk aggregation, accumulation, single risk, CAT, all those things that go within it. It's very hard to put that to sort of, you know, succinct bullet point, but if I leave you with the thought that there are many levers there, then that's the underwriting concept to consider all of those.
Yeah. Just on the third point, Andreas. No, we don't disclose the IRR for the component parts or parts within the portfolio. Just as a comment, as Greg's touched on there, you know, the CAT versus non-CAT piece is a big part of the way that we think about business that's coming through and, you know, hitting the schedule. Through the course of 22, we had a couple of disclosures basically showing that, you know, our non-CAT premium is around about 2/3 of what we're writing within the business. There's a significant part of what we do, obviously, which is tracking the margins, the technical margins around the non-CAT piece, and I think Greg just alluded to there.
As rates generally lifted in the property sector, and bearing in mind that we have access to the quota share, those premiums are up, largely driven by CAT in a number of places. Of course, it has the impact of producing suppressed, expected loss ratios around the attrition. The large losses are either non-CAT, and that's a big part of how we think about it. Probably last point on CAT versus non-CAT and relative returns. We are obviously sensitive to the cost of reinsurance that protects the business. Those retrocession costs obviously move up this year. The rates have gone up. We're always looking at the inwards margin versus the outwards margin, and that's the way we think about that.
Yes, inwards CAT, we're seeing very attractive rates and terms that are being offered, but we're always balancing that with, you know, what's the cost of protecting that, what's our ability to retain the margin, bearing in mind that the outwards reinsurance needs to be part of that, if you like, embedded net IRR.
Okay. Is there a way, I'm just looking at the 39% property rate increase, to split that out between what the rate increase is on the CAT side and what is on the non-CAT?
We don't, we haven't got that. We don't disclose that. I think generally on both counts for CAT and non-CAT, I think as Greg referred to earlier, the driver is right there. Ts and Cs less so. I think that's not the structure of your question, but no, we don't disclose that.
On the retrocession, what you just mentioned on a net basis, what, you know, the retrocession costs have gone up in some cases more than property CAT, what would the net increase more or less be on a property book?
Yeah, we haven't, we don't disclose the retrocession costs, on the outwards retrocession. We have a range, which if you actually could fill you back to the, guide and point you to the five-year plan. We have a range in there of, outwards reinsurance costs, year on year. In the main, we're pretty much within that range. It's at the upper end for this year, but we set a budget for outwards reinsurance when we were putting the plan together and updating the plan at, year-end or Q3 2022, 'cause we're expecting the market to, want to reprice for the retrocession losses they paid. We've come to where we are.
We're in a good place to support that program, and so we're within our budgetary range, which is a good place to be.
Understood. Okay, thank you very much.
The next one is from Barrie Cornes of Panmure Gordon. Please go ahead.
Good morning, and good afternoon, everybody. I'd like, obviously, just to echo Andrew's comments and congratulations on what's been clearly a very successful 1/1 renewal season. I've got 3 questions, if I may. First of all, just wondered if there's been any shift in the proportion of quota share at 1/1. The second question was, just wondered if you've seen a move from sort of all risks wording to more specified perils at the renewal season. Last of all, in terms of expense ratio, just wondered if the reduction is as a purely as a function of the increased premiums, or if there's been any benefit from any management actions or lower commissions or anything? Thank you.
Okay. Great. Perhaps, you know, talk on the second point. Perhaps I'll take the first and the third for the purpose of this. Shift in QS. 1/1 is a heavy QS renewal season. It was, it forms part of the negotiations that go through at that stage. For us, the move from QS to XL is kind of a single-digit % swing, so it's from one to the other, and that's the best way to think about that. We're really happy with the QS that we saw.
We bound more new business on the QS side, obviously as a proportion of the overall account, particularly on the property, the XL new submissions that are making our hurdle rate and the volume that's coming through has basically caused, as I say, that single-digit shift between QS and XL weighting. On the expense ratio, the acquisition ratio that we referred to, that is, I'm pleased to say, management actions. It is a % change and % shift on those contracts where I think I use the expression where we're in a kind of leading position, and it's on those quota shares where the power of negotiations just shifts year-on-year, and this year we were able to strike a harder deal, I suppose, is probably the way you think about it.
It's actually, it's management actions consciously looking to redress, shall we say, the balance of power that's probably gone on for about the last seven or eight years, where reinsurers have basically been in a position of having to defend against increasing requests for acquisition. I just I chalk it up as a perhaps a, you know, a first year win where we push back slightly.
Hi, Barrie.
Thank you.
All risks versus peril-specific. Yes, very, very pleased to say there was much more evidence of that this year around buying strategies. In part, I think it's a sensible process for a buyer to consider. You know, where a, if you take a nationwide U.S. XOL buyer, you know, last year, they may well have bought on an all perils kind of, you know, broad basis. But really what they're thinking about is U.S. wind and earthquakes. You know, a, a smart move was to, you know, focus on your needs as a buyer, I suppose, and simplify your requirements to the reinsurance market to, to, you know, maximize your chances of securing limit in a, in a, in a disequilibrium of supply and demand, as we mentioned earlier.
You know, moving to U.S. earthquake and U.S. windstorm only, much more evidence of that. In Europe, again, same concept applied. Identification of European Flood, European earthquake, European windstorm as separate perils, and seeing parallel structures being put in place with pricing accordingly. You know, whether as a reinsurer you wanted to or preferred to sell European Flood versus European windstorm, you were able to make those selections and obviously have your own view on the pricing and the margins associated with that. You know, the other point to note, particularly in the U.S. again, so peripheral coverages that exist though are improbable, that in prior years probably haven't had sufficient. This is an Excess of Loss comment here, really.
Haven't had necessarily sufficient premium allocated to them, things like strikes and riots, et cetera, were commonly excluded on an absolute basis from treaty contracts. Noting that the contracts sold are sold as Natural Catastrophe Excess Loss contracts. You know, it would make sense to simplify them to cover just natural catastrophes. Yeah, really, really pleased and that was very good. Thanks.
Great. Thanks, Greg.
There are no further questions on the conference line. I will now hand over to Trevor Carvey for closing remarks.
Okay, thanks very much, and thanks everyone for joining the call. It's obviously been an interesting renewal season, to put it mildly. Hopefully you found this informative and able to bring you up to date on some of the underlying kind of dynamics of it. Our next scheduled call is on February 22nd, as I mentioned, for the 2022 year-end financial results. I encourage you if in the meantime you have any further questions, please get in touch with Antonio and the team. Thanks very much.