Reinsurance News

Further disappointment for Jan 2019 renewal possible, says Morgan Stanley

2nd July 2018 - Author: Charlie Wood

After meetings with seven re/insurers (Arch, Axis, Hiscox, Nephila, PartnerRe, RenRe, and Third Point Re), Morgan Stanley has indicated that, in absence of large, unexpected losses or significant industry reserve issues, there’s potential for further pressure at the key January 2019 renewals.

morgan-stanley-logoMorgan Stanley points to an abundant supply of alternative and traditional reinsurance capital challenging the long-term business model of re/insurers and suppressing expected rate increases.

Underlining disappointing pricing at recent renewals, Morgan Stanley stated that, following a record $140bn+ of catastrophe losses in 2017 and approximately 50% cumulative rate reduction in the last five years, property catastrophe rates increased a modest +5% at Jan 1 renewal.

The industry is hoping for further pricing gains at mid-year renewals as there are more loss-impacted accounts renewing in Florida at June 1st, 2018.

However, there’s an indication of flat to +5% rate increases, suggesting disappointment for reinsurers.

Stratumn, by SIA Partners

Loss free accounts are largely renewed at expiring terms while loss impacted accounts rate changes range from flat to high single digit increases.

Morgan Stanley indicated that alternative capital has been a key driver of property catastrophe pricing decline in recent years.

But as well as being partly responsible for rate pressure, the abundant supply of both alternative and traditional capital continues to favour buyers of re/insurance without meaningful increase in demand.

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