The Florida-focused June 1 renewals showed a continued rise in property catastrophe reinsurance rates, with analysts at Peel Hunt highlighting that rates are now 1.5x higher than the 2017 trough and 46% above the previous peak all the way back in 2006.
Citing data from broker Howden Tiger, analysts note that the June 1st reinsurance renewals saw property catastrophe reinsurance rates rise by 33% on average.
This is within a 25%-40% range and incorporates similar trends as at the 1 January renewals in Europe, say analysts. The strong rate improvements were driven largely by a reduction in the supply of capacity against rising demand for risk transfer, driven in part by inflation.
In fact, “US property catastrophe rates have increased by a compound of 21% in the past three years,” analysts explained.
Adding: “Florida is a peak zone and interestingly the higher layer programs saw rate rises in excess of 40% impacted by the introduction of new minimum rate thresholds, according to Howden Tiger.”
Analysts also highlight a shift in the underwriting mix, with more demand for higher layer programs from capacity providers (both traditional and ILS capital) as the shift away from lower layers persisted.
Mid-year renewals reports from brokers revealed that renewal negotiations kicked off very early this year, and it seems to have been an orderly marketplace.
Analysts also noted that, in terms of available capital, Howden has seen some recovery in ‘dedicated’ reinsurance capital and capacity was available with the right structure and at the right price.
“These attractive programs were in some areas oversubscribed. However, in general low levels of capital persist,” Peel Hunt added.
Regarding global commercial insurance rates, they continued to increase during 2Q 2023 (by c.3% vs +4% in Q1), with all major territories up in the low-single digits. US commercial lines rates increased by 4%, while in theUK they increased by 1% and Europe by 5%.
“Rate increases across Property classes in 2Q 23 were +10% (similar to 1Q), driven by the strong rate increases in the US (+19%) and Europe (+8%). In the US, property insurance rates increased, supported in part by an increase in insured values and the sharp rise in reinsurance rates that are being passed on,” analysts stated.
“We suspect coastal property showed the most significant rate rises alongside properties exposed to secondary perils (convective storms, wildfires, flooding).
“The picture in Casualty continued to be more mixed,” Peel Hunt analysts continued. “Whilst global casualty class were 3% overall during 2Q, Financial and Professions lines continued to soften albeit from a high base (-8%).”
US casualty pricing was up 3%, but US financial and professional lines were down 10%, with new competition and reduced activity in the Financial sector, and the US D&O declined by 13%.
Finally, despite seeing a rise, cyber rates slowed down, to +1% in 2Q from +11% in 1Q. In addition, analysts noted that the pace of rate increases continues to taper off from +28% in 4Q 22 due to rising competition. Cyber rates in the US are starting to decline (-4% in 2Q) whilst rising in Europe (+3%).
