Risk-adjusted property catastrophe reinsurance rates increased by 5-10% on average at the June 1st, 2021 renewals as price momentum decelerated year-on-year, according to HX, the digital, analytics, and advisory unit of Howden Group Holdings.
According to data available in financial and underwriting data platform, NOVA, reinsurance rate momentum remained at the recent June 1st renewals, albeit at a slower pace than witnessed in 2020.
As a result, HX finds that pricing has now risen to above levels last seen at June 1st, 2013 in the aftermath of Superstorm Sandy.
David Flandro, Head of HX Analytics, commented: “Using NOVA placement data and wider market financials, we have identified the most prominent headwinds and key offsets driving the market at 1 June. The renewal was ordered if highly varied against a backdrop of significant uncertainty and elevated first quarter catastrophes.”
At the Florida focused June renewals, risk-adjusted outcomes were strongly influenced by loss experience, programme structure, and also the fact insurance-linked securities (ILS) capacity is increasingly available for higher layers, says HX.
In the casualty reinsurance space, HX notes that pricing trends seen at January 1st, 2021 remained in place, with higher rates on underlying business enabling reinsurance carriers to seek raises while reducing pressure on ceding commissions.
After a challenging 2020, the reinsurance sector approached the mid-year renewals with improving earnings and an abundance of capital. And, as HX explains, stronger investment returns during the opening quarter of the year contributed heavily to growth in net income, year-on-year.
However, on the underwriting side of the business, combined ratios did deteriorate slightly in Q1 2021, year-on-year, as losses from the unprecedented Winter Storm Uri in the U.S. more than replaced reported losses from the COVID-19 pandemic in Q1 2020.
Considering this, HX says that reinsurers are preparing for an “active catastrophe year in an uncertain macroeconomic environment.”
As we’ve discussed previously, initial projections suggest that the 2021 Atlantic hurricane season has the potential to be very active, while the chance of major hurricane landfalls occurring is also seen as above-average.
Additionally, HX says that both inflation and interest rate fluctuations could have a negative impact on balance sheets as the global economy looks to recover from the ongoing pandemic.
Michelle To, Head of Business Intelligence at HX Analytics, said: “With NOVA, you can see well beyond today’s renewal snapshot; you can compare it to underlying primary pricing, to historical trends, to buyer behaviour patterns, and to macro-fundamental factors to name a few. This insight enables Howden clients to watch the market unfold in real time in a fully digital environment every day of the year.”