Analysts at Moody’s have asserted that pricing conditions will remain favourable for reinsurers next year, with momentum expected to continue through the January 2023 renewal season.
With the Atlantic hurricane still to run its course this year, the rating agency believes it remains too early to determine whether reinsurers will post strong profit for the full year 2022.
But given inflationary pressures, particularly in rebuilding costs as well as higher frequency and severity of catastrophes, it anticipates that reinsurance rates will respond to these challenges with continued growth.
Against the headwinds of rising inflation and broader economic challenges, as well as the prospect of more catastrophe losses to come, Moody’s notes that reinsurance management teams have generally decided to focus on improving the underlying margins for property catastrophe coverages.
“Despite the favorable pricing conditions, the sector remains exposed to potentially large catastrophe events, rising loss costs as a result of economic and social inflationary trends, and uncertainty with regard to exposures related to the ongoing military conflict in Ukraine,” analysts concluded.
Reflecting on the mid-year renewals from 2021, Gallagher Re surmised that a seller’s market persisted, with economic factors helping to sustain price hardening, despite no obvious lack of available capacity for reinsurance buyers.
Aon similarly described a “near-perfect storm” of constrained capacity and rising demand for reinsurance coverage at the important June and July renewals, with a “true hard” property market still to come.
And according to Guy Carpenter, property catastrophe reinsurance rates-on-line in the U.S. have risen by almost 15% so far this year, representing the largest increase in the Guy Carpenter U.S. Property Catastrophe Rate on Line Index since 2006.
