Reinsurance News

June 1 rates expected to be up 10% – 30% for loss-affected accounts: Analysts

3rd June 2019 - Author: Luke Gallin

Meetings with insurers and reinsurers in Bermuda points to an expectation of average mid-year reinsurance renewal price increases of 10% – 30% for loss-affected accounts, according to analysts at Morgan Stanley.

Reinsurance renewalsAfter a prolonged period of falling rates, heavy catastrophe losses and a muted rate response, reinsurers were hopeful of a significant response at the June 1st, 2019 reinsurance renewals.

Following discussions with Bermudian re/insurers, analysts note that property catastrophe reinsurance pricing continued to gain traction at the mid-year renewals, with reinsurers staying firm on pricing, leading to an expectation of average rate increases of between 10% and 30% for loss-affected business.

Loss free business is renewing flat to up 10%, while risk-adjusted pricing is up less, by roughly 10 percentage points, say analysts. Morgan Stanley notes that while this is welcomed on the back of lacklustre renewals, pricing levels remain below that seen in 2012.

Commentary from re/insurers also highlighted limited supply of retrocessional capacity, which is a reflection of unattractive rates and also the fact some alternative reinsurance capital remains trapped from recent catastrophe events. Furthermore, the total industry loss from hurricane Irma could still move upwards, with more than a year remaining on its statute of limitations.


Analysts also state that the ability to model California wildfire risk, which has come under scrutiny following significant industry losses from the peril in recent years, as well as concerns on hurricane Michael, have resulted in less enthusiasm from third-party participants to put capital to work. At the same time, the loss of CATCo, one of the largest providers of retro, adds to the current tight retro marketplace.

“While we continue to believe that alternative capital will remain an integral part of the property cat reinsurance market, until retro pricing improves, we expect investors to generally remain on the sidelines. Wild cards in filling any unmet capacity could be the global reinsurers, but our checks with SwissRe indicate a muted desire to pick up share in the Florida market at this point,” say analysts.

On the back of a muted rate response at the January 1st, 2019 renewals, there’s been evidence of an industry-wide view that rates need to improve further. Market commentary through the first-quarter of 2019 and heading into the mid-year renewals suggests a more disciplined marketplace.

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