The recent June 1 renewals which mainly focuses on the Florida market, showed that property catastrophe reinsurance rates rose 33% on average according to Howden Tiger, However, analysts from Peel Hunt say that this lies within the 25-40% range, which reflects similar trends that were witnessed in the 1/1 renewals in Europe earlier this year.
The trends were largely driven by a reduction in the supply of capacity vs rising demand for risk transfer, which was in part due to inflation.
Analysts also highlighted how US property catastrophe rates have increased by a compound of 21% in the past three years, which are also 1.5x above the 2017 trough and 16% higher than the previous peak in 2006. As well as this, rates are also 46% above 2012, which was the year that a soft market started to set in.
Moreover, Florida is a peak zone, and the higher-layer programs saw rate rises in excess of 40%, was impacted by the introduction of new minimum rate thresholds, according to Howden Tiger.
Analysts noted that this suggests that there was a shift in the underwriting mix, with more demand for higher-layer programs from capacity providers (both traditional and ILS), as the shift away from lower layers continued.
Meanwhile, global commercial insurance rates continued to increase, as they rose 4% during Q123 with all major territories up in the mid-single digits. US commercial lines rates also increased 4%, with UK rising 3% and Europe by 5%, respectively.
Analysts also stated that rate increases across Property classes accelerated to 10% in Q123. This was driven by the strong increases in property reinsurance. In the US, property insurance rates increased 17%, in part supported by an increase in insured values (+9%). Coastal property showed the most significant rate rises, alongside properties exposed to secondary perils (convective storms, wildfires, flooding).
However, the overall picture in Casualty was much more mixed. Even though global casualty class was up 3% overall during Q1, Financial & Professions lines continued to soften, albeit from a high level (- 5%).
US casualty pricing was up 5% in excess liability – which excludes Workers Compensation, which Lloyd’s does not write – US Financial and Professional lines were down 9%, which was notably dragged down by D&O (-13%), as well as new competition and reduced activity in the Financial sector.
Lastly, cyber rates were still up significantly (+11%), but analysts warned that the pace of rate increases is tapering off from the +28% that was seen in Q422, which is mostly due to rising competition, as well being partially offset by ongoing ransomware attacks.
