Artemis ILS NYC 2020

Menu

Reinsurance News

Analysts expect mid-teen reinsurance rate increases at mid-year renewals

31st May 2019 - Author: Luke Gallin

Analysts at KBW expect average June 1st catastrophe reinsurance rate increases in the mid-teens, but warns that Florida cat rates remain far below previous peaks.

Reinsurance renewalsAnticipation of average rate increases in the mid-teens at the upcoming mid-year renewals follows analysts’ meetings with Bermudian insurers, reinsurers and brokers. KBW notes that expectations are modestly above pricing expectations heading into discussions, but warns that pressure still remains.

Intense competition and an abundance of capital meant that rates failed to improve either meaningfully or sustainably following a period of elevated catastrophe losses. KBW notes that current increases are on the back of June 2018’s very modest increase, which came after six consecutive years of rate decreases.

“Current Florida pricing is probably at 2015-2016 levels – still significantly below 2006’s post-Katrina peaks, with still-limited participation amongst the reinsurers of last resort (i.e., Berkshire, D.E. Shaw, and Chubb),” say analysts.

Following meetings with Bermudian market players, analysts note that year-on-year increases were “very widely dispersed,” with rate improvements varying as a result of loss experience, geographic exposure, and also the time at which companies came to market.

In a reverse of last year’s trend, KBW says the large majority of companies it met with expected a handful of Floridians to not complete their reinsurance programs prior to June 1st.

“This year’s overall improved discipline was consistently ascribed to a relatively small number of leading Florida reinsurers (including RNR, RE, Nephila, and AIG’s Validus/AlphaCat) drawing – and sticking by – a firm line in the sand, and very limited ‘new’ capacity entering the market, as neither new (or reloaded) ILS capacity nor European reinsurers (which are generally underweight Florida risk) are pursuing significant market share gains,” say analysts.

Florida Governor Ron DeSantis recently approved proposed reforms to assignment of benefits (AOB) practices in the state, an effort to stabilise the recent explosion in AOB litigation and provide policyholders with the tools to protect themselves against predatory vendors.

Analysts note that no one it met during its Bermuda trip sees Florida’s AOB litigation as more than a “marginal factor” that might modestly hinder rate increases at the mid-year renewals.

Looking forward, and company executives anticipate at least one full-year of sustained rate increases, which suggests higher reinsurance rates at mid-year 2019 and the important Jan 1st 2020 renewals. Analyst state that current increases are insufficient to attract a significant amount of new capital.

Recent Reinsurance News

Getting your daily reinsurance news from Reinsurance News is a simple way to receive only the reinsurance industry news that matters, delivered directly to your email inbox.

  • Only email is mandatory, but the more you tell us about yourself the better we can serve you in future!
  • This field is for validation purposes and should be left unchanged.

By submitting the form you are giving your consent to be emailed by us.

Read previous article:
Moody’s remains stable on Korean life sector despite slip in demand

Moody’s Investors Services has maintained its stable outlook on the Korean life insurance sector, citing an improved product mix and...

Close