Property catastrophe re/insurance rates fell by an average of 1% at the January renewals, but there was a wide divergence in trends between loss-affected and loss-free accounts, according to analysts at Peel Hunt.
The firm attributed some of the muted results at the recent 1/1 renewals to the focus on European business, which as a region did not experience any major loss events in 2018.
Analysts noted that loss-free property cat rates were down -5% to 0% in Europe and -2.5% to +5% in the U.S.
In contrast, loss affected property cat rates rose by between 5% and 20% in the U.S, and non-cat property rates saw similar levels of divergence.
Peel Hunt also suggested that an ample, but somewhat tighter, supply of capital was met by rising re/insurance demand at the 1/1 renewals as insurers lowered their retentions, helping to support rates.
While concerns about weakening market conditions have not materialised, neither have hopes for a further recovery following the sizeable catastrophe losses during the second half of 2018.
Analysts claimed that heavy catastrophe losses in the U.S and Japan (which renew in June/July and April, respectively), together with loss creep from the 2017 hurricane season, avoided rates swinging back to a softening trend at 1/1.
This helped to firm the retrocession market, where rates increased again in 2019 by 0-15% for loss-free accounts and 15-35% for loss-affected accounts.
As such, there is some supply side tightening, Peel Hunt said, and the alternative capital market has not reloaded ahead of the January renewals, choosing instead to be more cautious.
Given the wide divergence in rate movements, analysts expect to see different kinds of behaviour across individual underwriting portfolios following the renewals.
Peel Hunt’s comments follow analysis from Willis Re, who noted that the January renewals highlighted a “pricing gap”, and JLT Re, who said that the renewals defied expectations of post-loss firming for a second consecutive year.