Analysts at Keefe, Bruyette & Woods (KBW) are expecting rate changes at the 2020 property catastrophe reinsurance renewals to vary significantly, based on the loss experience of individual lines.
At January 1, KBW is anticipating the largest increases on retrocessional cover, owing to recent large losses and the significant amount of insurance-linked securities (ILS) capital still trapped by Typhoons Faxai and Hagibis.
For US national risks, meanwhile, rates are likely to increase moderately as January 2019 renewal quotes were generally issued prior to the December 2018 wildfire losses in California.
On the other hand, rate increases are expected to be very modest for European risks, as the absence of major losses should largely offset the impacts of global events, as well as growing concerns about climate change.
However, KBW believes pricing momentum will accelerate more broadly during the Asia-focused April renewals, as reinsurers will factor in the significant loss creep from 2018’s Typhoon Jebi, as well as the large losses from Typhoons Faxai and Hagibis this year.
Analysts don’t expect rates to reach the huge post-event increases of the past, mostly because of potential ILS capital availability.
While ILS investors largely remain interest in property catastrophe reinsurance as a diversifying investment class, KBW notes that the underperformance of many catastrophe models has led investors to demand higher rates.
