Analysts at KBW say they are expecting to see a broad decline in specialty reinsurers’ core loss ratios year-on-year, as they assess the market in the wake of Hurricane Ian and amid the challenging interest rate environment.
Looking at the implications of these conditions for various business lines, KBW is forecasting some core margin volatility stemming from large property losses and business mix changes for many reinsurers.
However, the firm also noted that, for many specialty lines outside of catastrophe exposed business, loss ratios should still decline due to an absence of signficant loss activity.
This should help to hold down some core loss ratios more generally, it added, outside of the catastrophe losses from Ian and elsewhere.
Looking ahead to the 2023 renewals, KBW was also positive on the prospects for property catastrophe reinsurance pricing, saying that it expects to see “very optimistic commentary.”
Analysts believe that almost all underwriters, but especially reinsurers and auto insurers, will report significant catastrophe losses stemming primarily from Hurricane Ian, along with Hurricane Fiona, Typhoon Nanmadol, and other smaller losses.
For commercial lines insurers, they suggest most Q3 written rate increases should be flat or slightly lower sequentially, although premium increases should stay above underlying claim expense growth rates.
KBW analysts expect the biggest rate increases for cyber insurance and catastrophe-exposed property risks, with workers compensation rates flat or up modestly.
For personal lines, meanwhile, constrained marketing spend, accelerating earned rate increases, and decelerating used vehicle prices should start lowering core personal auto loss ratios.
Meanwhile, persistent commercial P&C rate increases and ongoing exposure unit growth sustain at least mid-single-digit organic revenue growth for broker, KBW says.
