Ulrich Wallin, the Chief Executive Officer (CEO) of global reinsurer Hannover Re, isn’t very optimistic on the Florida renewals owing to the substantial availability of capacity that continues to drive a supply / demand imbalance, in spite of 2017 catastrophe events.
Speaking during the firm’s first-quarter 2018 earnings call, the CEO said that regarding the outlook for mid-year renewals, the Florida renewal season “will be quite interesting” while the remainder of the mid-year renewals are expected to follow the January and April renewals.
“I’m afraid I’m not very optimistic on the Florida renewals because that business is dominated by the ILS market. And for the ILS market, Florida is key for their portfolios.
“The demand for reinsurance in Florida is not increasing this year, as far as I can see, but the supply definitely will,” said Wallin.
He continued to explain that ultimately there will be rate increases in Florida, particularly in light of recent movements with the hurricane Irma loss, but stressed that he doesn’t expect “the hopes of the market” to be fulfilled during that renewal.
The insurance-linked securities (ILS), or alternative reinsurance capital market responded well to 2017 events, reloading in time for the January renewals season and continuing to outpace the growth of the traditional market.
However, while the sub-sector of the re/insurance market is starting to expand its remit outside of the U.S. property catastrophe space, it remains very focused on Florida business and as such is expected to dampen any rate rises here at the mid-year renewals.
Outside of Florida, Wallin anticipates the mid-year renewals to follow the January and April renewals, with loss-affected treaties seeing rate increases, particularly on the U.S. property business.
The reinsurer noted a successful renewals season in both January and April, but it’s clear from its CEO that it doesn’t expect to see the kind of rate increases on Florida business at the mid-year that many in the industry are hoping for.
It’s clear that pricing and terms have improved in the global reinsurance industry following 2017 catastrophe events, but warnings like this from Hannover Re alongside other industry commentary, suggests that price increases might be unsustainable as the supply of reinsurance capacity continues to outweigh demand.