Powell Brown, President & CEO of US broker firm Brown & Brown, has warned of late-running renewals and challenging changes to reinsurance prices and terms following Hurricane Ian.
Speaking during a Q3 earnings call, Brown said that reinsurance renewals would likely run “deep into December” with formidable pricing increases expected for property catastrophe business, as well as higher deductibles.
Brown & Brown grew its revenues by 20.4% to $927.6 million during the third quarter of 2022, including organic growth revenue of $799.1 million, up 6.7% from last year, but slowing from the 10.3% organic revenue growth rate posted by the firm for Q2 2022.
“Regarding 1/1 reinsurance treaties, they will be under significant pricing pressure,” Brown said during the call. “This will drive commercial and residential CAT exposed property rates up and will lead to increases in wind deductibles.”
The CEO warned that these conditions would create further financial challenges for businesses and consumers after four years of significant premium increases and reductions in capacity, but maintained that his company remained “well positioned” to help customers.
Brown also pointed to the impact of Hurricane Ian losses on the sector and the prospect of further upward pressure on property through the fourth quarter of the year.
Rate increases for the first half of 2023 will then be influenced by the outcome of 1/1 reinsurance treaties, he suggested, and early indications would suggest material upward pricing on property catastrophe business.
“Regarding Hurricane Ian, there’s still a number of unknowns that will play out over the coming months. The first will be the ultimate losses incurred by carriers and how these will impact the reinsurance programs,” Brown explained.
“Second, there’s uncertainty around how state plans will react,” he continued. “Based on the severity of losses, it will influence the 1/1 reinsurance treaties and pricing for all CAT exposed property. Capacity for commercial and residential property is going to become even more constrained driving rates and deductibles even higher.”
Brown concluded: “I would guess that the reinsurance renewal would go deep into December before they finalize everything because of the disruption in the marketplace.”
