The condition of the property catastrophe reinsurance market following 2017 catastrophe events and the January and April renewals, suggests a flat mid-year renewals season is not out of the question and that average pricing will be up a few points at best, JMP Securities says.
Following two days of meetings in Bermuda, it is believed that previous indications from JMP Securities’ Q1 reporting, which suggested that mid-year pricing would be up but less so than those seen in Jan 1, are likely too optimistic.
Considering the consistency of property cat pricing following last year’s catastrophe losses of approximately $140 billion, JMP Securities says property cat reinsurance is firmly in commodity territory, driven by an influx of collateralised capacity.
The firm has described the fact that pricing could be within a stones’ throw of flat even after such a devastating and costly catastrophe experience, as initially “mind boggling”. However, after assessing market dynamics and taking into account how well modelled hurricane Irma was, as well as the speed at which capital reloaded to levels above that seen pre-event, “it makes much more sense.”
“In a nut shell, the events were not unexpected, thus forward expectations did not need recalibration, and post-event increases in supply outpaced increase in demand,” says JMP Securities.
JMP does see some potential for rates to strengthen more convincingly if conditions allow it, such as interest rate hikes. However, the likelihood of cat losses alone impacting pricing, particularly from well-modelled events, is seen as unlikely owing to the amount of capital sat on the sidelines waiting to enter.
