Analysts at investment banking group Jefferies have predicted that the trend of reinsurance price firming should last at least 18 months, and potentially longer.
High natural catastrophe claims over the past few years, combined with underlying claims inflation in the US and the impact of low interest rates will likely sustain the hardening reinsurance cycle until at least the end of FY2021, Jefferies said.
The firm noted that reinsurance pricing was broadly up between 5% and 35% at the June and July renewals, with momentum building from the year’s earlier renewals.
Price rises were also seem across almost all lines globally, allaying fears that the hardening conditions in commercial lines and reinsurance might not be replicated across every region and business line.
The lines where some price reductions have still been found include catastrophe free contracts in South Africa and China, which we expect are a small proportion of the renewals.
Elsewhere, price rises have been achieved in lines as diverse as Florida Catastrophe, International Motor and Global Personal Accident.
Jefferies comments do contrast somewhat with recent analysis from Fitch, among others, which warned that the recent influx of capacity into the market could slow and eventually halt the hardening price cycle.
Looking specifically at Medical Excess rises, Jefferies noted that reinsurance contracts have priced up by more than 50% in some cases, due to the challenges of the COVID-19 pandemic.
And Workers’ Compensation rates are also turning, analysts added, with lines generally seeing price increases of between 2% and 5%.
Given that this line has consistently surprised on the upside (since 2016) in terms of prior year development, there are some concerns that reserve releases were likely to soon run out.
