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Price increases will fall short of hard market: Canaccord Genuity

18th September 2019 - Author: Matt Sheehan

While the industry seems confident that rates will continue to increase in 2020, analysts at Canaccord Genuity argue they will not be enough to move reinsurance into ‘hard market’ territory.

market growthBased on its meetings at the Reinsurance Rendezvous in Monte Carlo this year, Canaccord Genuity believes that the market is anticipating reinsurance rates to increase at a moderate pace, or somewhere around +5%.

However, as in 2018 and 2019, there will likely continue to be a clear differential in pricing between loss-free and loss-hit accounts, and between insurance, reinsurance, and retrocessional prices.

Reinsurance is likely to fare the worst in terms of rate rises, although if there is significant catastrophe activity in the remainder of 2019 this could upset the dynamic.

Currently, S&P are forecasting that reinsurance rates will rise by around 5% in 2020, while Fitch has estimated 1-2% and Moody’s is at 0-5%.

In contrast, Canaccord Genuity expects to see more significant rate firming in retrocessional reinsurance, where capacity has retreated due to trapped ILS capital and the collapse of CATCo, which provided around a quarter of the market’s capacity.

Executives from both Swiss Re and SCOR have recently spoken out on the reinsurance pricing environment, asserting that rates must continue to increase considerably before business can return to sustainable levels.

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