The U.S. excess & surplus (E&S) lines property catastrophe reinsurance renewals in the second-quarter of 2018 could see rate increases of as much as 20% or 30%, for certain loss affected accounts, according to broker Guy Carpenter.
Discussing the state of the excess and surplus (E&S) lines segment of the re/insurance market, reinsurance broker Guy Carpenter said that “2017 was a transitional year and the evolution will continue in 2018 as the market changes from extremely soft to generally harder.”
So rate increases seem likely across the E&S sector and therefore the reinsurance backing E&S underwriters is also expected to become more expensive as well.
Through 2017 the E&S market “remained consistent and disciplined with its pricing and risk selection,” Guy Carpenter says.
But then the major losses of the third and fourth-quarters of 2017, from the three hurricanes to the California wildfires, are thought to have left the E&S underwriters with a significant loss burden.
Guy Carpenter estimates that the E&S market may have absorbed as much as 15% to 20% of the industry losses from hurricanes Harvey, Irma and Maria. The California wildfires will have driven some further losses to the sector.
So that suggests E&S underwriters will seek to increase their rates, while the reinsurers backing them will also seek to ensure they benefit from higher rates to cover their exposures.
“Most E&S property catastrophe reinsurance treaties renew in the second quarter, which will give reinsurers time to assess their 2017 losses and determine the levels of rate increase that may be necessary,” Guy Carpenter explains.
Continuing, “Currently, the general consensus is that companies with significant cat losses will see rate increases in 2018 estimated as high as 20 percent – 30 percent while companies with little to no 2017 catastrophe loss will remain relatively flat, depending on attachment.”
Reinsurers of E&S programs will be hoping to achieve those levels of rate increase, where losses have been suffered, while they will also be hoping to push E&S reinsurance rates up across the board, albeit by lower percentages, where they can.
