Global catastrophe rates have surged by 27% year-to-date, with the United States experiencing the highest increase at 35%, according to RBC Capital Markets.
The property catastrophe rate indexes have reached levels not seen since 2006, when a significant number of new insurers emerged, including notable companies like Lancashire.
Across various sub-segments, insurance rates have continued to rise in 2023, with the exception of Specialty lines. The softening of Directors and Officers (D&O) and cyber rates, which were already at healthy levels, has driven this trend.
However, the re-acceleration of commercial rates is expected to bolster reinsurance pricing, as primary carriers can pass on higher reinsurance costs.
Specialty re/insurance sector continues to face a very hard market environment, according to RBC Capital Markets.
Depressed capital levels remain a challenge for the industry due to unrealised asset losses following the interest rate spike in 2022. This has somewhat limited the supply of capital at a time when demand is increasing due to inflation and heightened risk aversion.
Despite robust issuance of alternative capital year-to-date, almost surpassing the total for the entire year of 2022, the growth in alternative capital has not been substantial enough to disrupt the pricing environment.
RBC Capital Markets believes that although there has been a significant shift in renewals this year, it should not be considered a permanent repositioning. Instead, it is attributed to a coordinated industry-wide effort to guarantee earnings and enforce responsible capital management.
This approach aims to demonstrate tangible results and break away from the perception of making promises for the future without delivering. It can be seen as a “show-me” narrative that seeks to dispel the sector’s reputation of always deferring positive outcomes.
