Having said before that it expected rate momentum to continue through 2018, global insurance and reinsurance firm Hiscox has now changed its tune, saying that it sees “little prospect of rate improvement” for the rest of this year.
In February, the Hiscox management suggested that they were anticipating further rate increases in 2018, which would give them a chance to further grow the business.
But, just a few months on, the company now suggests that the high levels of capacity and competition from both traditional and alternative sources mean that ongoing rate rises are deemed unlikely.
Bronek Masojada, CEO, explained, “After a costly year for catastrophes in 2017, our London Market and reinsurance businesses mobilised quickly to grasp the opportunity and grew strongly.”
While Hiscox had a strong January renewal, growing its premiums by 24.3% across the business, with especially strong growth in the Hiscox Re & ILS unit focused on reinsurance opportunities underwritten out of Bermuda, this growth is not likely to be as strong through the other renewals of the year.
“Sadly, discipline and good sense is receding in the market, so for the rest of the year growth in big-ticket business will be more measured,” Masojada said.
“The first quarter saw some continuation of the positive rate movement experienced in the second half of 2017, however it has not been widespread,” the company explained.
In the London market Hiscox saw rates increase the most in catastrophe exposed business, with 20% increases in aggregate, while US household and commercial property binders saw increases of up to 10% and some pressured casualty lines also saw increases.
Hiscox said on the prospects for London business, “Whilst the rate environment has improved in some lines, the momentum is slowing and pricing discipline in the market is beginning to recede. This may impact the volume of business written this year.”
While in reinsurance, “Price declines have arrested and the positive momentum experienced in the lead-up to 1 January renewals has continued,” Hiscox said.
With prices rising the most in the U.S., where Hiscox reports a 9% rate increase across its portfolio, but the firm reports that disappointingly rates at April 1st were largely flat.
For the rest of the year the outlook is no longer as buoyant as it was, with the company saying, “As we look ahead to further mid-year renewals in June and July, we see little prospect of rate improvement as an abundance of capacity from traditional and alternative sources remains a feature of the market. ”
Discussing the experience in property catastrophe business in the U.S., Hiscox said, “Growth in US property catastrophe and excess of loss business, where rate improvement has been most significant, has been hard fought. We will maintain our disciplined approach and grow where returns are attractive. We have seen increasing demand for our suite of risk excess of loss products, where we have been market leaders for some time.”
That suggests the company may be expecting some growth opportunities at the mid-year renewals, despite overall rates looking set to be relatively flat.
By selectively securing lines on accounts which have faced major losses in 2017, it still may be possible to secure overall rate increases at the mid-year renewals, but that will come at the expense of taking on much more peak exposure, so it will be interesting to see how firms navigate this at June 1st.
The outlook has clearly changed in recent weeks, making Hiscox much less confident in the renewal prospects for the middle of the year. However, with its diversified platform and access to ILS capacity as well as quota share partners, the firm may still be able to construct a more profitable book and fee business than it could a year ago.