Data from Hyperion X Analytics reveals that property catastrophe reinsurance rates-on-line increased by an estimated 26.1% at the June 1st, 2020 reinsurance renewals.
The company has released its June 1st property cat rate-on-line index, which indicates average risk-adjusted rate increases of 26.1%.
Prior to the COVID-19 pandemic, reinsurance rates were expected to rise at the mid-year renewals as companies look to improve profitability after consecutive heavy loss years and fading margins.
While rates were expected to rise in a meaningful manner in loss-affected lines across Florida, the COVID-19 pandemic is exacerbating market firming as the insurance industry grapples with the challenges.
Hyperion X Analytics is the data analytics focused unit of Hyperion Insurance Group, the parent of RKH Reinsurance Brokers. The firm tracks the average risk-adjusted pricing it sees in the reinsurance renewal market and tracks pricing trends in an index.
Analysts at KBW have commented on the June 1st pricing update from Hyperion X, noting that at 26.1%, the average risk-adjusted rate increase is at the lower end of the expected 25-45% range, which was outlined during KBW’s recent virtual Bermuda tour.
While at the lower end of the range, the 26.1% average increase is actually the highest year-on-year increase since the +27.9% recorded in 2002, and is the third-highest overall increase since 1992.
The June 2020 index shows that property catastrophe reinsurance rates are now back at their highest level since 2012, which analysts note was before much of the expansion of alternative, or third-party capital in the space.
Reports have suggested that property and casualty rates will continue to firm through 2020 and into 2021, while some analysts have also said that 2021 could be the hardest P&C market for some time.
The data from Hyperion X shows that reinsurance rate increases are accelerating at a pace not seen since 2002, suggesting the availability of higher underwriting returns for reinsurers as they look to offset the impacts of the COVID-19 pandemic on both sides of the balance sheet, and take advantage of improving market conditions.