The property re/insurance market experienced some firming at the recent January renewals, which could translate into double-digit rate increases for catastrophe-exposed business as we progress further into the year, according to analysts at AmWINS.
The specialty insurer added that spikes of up to 40% were “not out of the question” for certain lines of catastrophe-exposed and loss-affected business.
However, pricing conditions varied considerably between cat-exposed and non-cat property business, with underwriters mostly offering flat renewal rates on non-cat exposed property.
This was also the case for reinsurance, as loss impacted carriers saw rate increases, while disciplined carriers with good loss records received risk-adjusted rate reductions of between 0% and -5%, AmWINS said.
“There is still competition for clean, non-CAT business, particularly in desirable classes,” said Harry Tucker, Executive Vice President and National Property Practice Leader for AmWINS. “Those accounts can still expect moderate to flat pricing renewals.”
The retrocession market also saw double-digit rate increases across loss-affected accounts, although analysts noted that reinsurance costs may not give a complete picture of market conditions.
“The primary carriers have suffered the most over the last two years, and this has caused many primary markets to tighten their underwriting guidelines, push for rate, or exit classes of business,” explained Jeff McNatt, Executive Vice President and Florida Region Leader for AmWINS.
“Therefore, we need to understand how individual carriers view risks and what fits into their appetite and not draw specific conclusions.”
In terms of property market trends going into 2019, AmWINS highlighted the ongoing abundance of capacity, as well as a tendency towards more conservative underwriting, whether through reducing limits or tightening terms.
In London, this is reflected in the performance management process underway at Lloyd’s, which is expected to shrink its 2019 gross written premium by around 5%.
Two consecutive years of catastrophe losses have also had an impact on the insurance-linked securities (ILS) market, which is expected to continue its upward trend into 2019, but with some differences in the way investors decide to allocate their funds.
“We are still seeing an influx of new ILS capital, albeit not to the degree as in years past,” Tucker continued. “The biggest difference today is that new capital is being deployed more strategically.”
Going forward, AmWINS expects the property re/insurance market to explore the use of innovative new products such as non-physical damage business interruption (NDBI) covers and further customisable options for parametric covers.
“By offering Insureds specific exposure coverage where they see the most need, carriers can allocate expense to match their appetite for risk and help manage cash flow,” said Tucker.
