Analysts at S&P Global Ratings believe that the positive reinsurance pricing momentum seen at the recent January renewals is likely to be carried forward into the other upcoming renewals in 2020.
According to S&P data, global average rate increases were in the low-to-mid single digits in aggregate at the 1/1 reinsurance renewals.
In general, there was no reinsurance capacity constraint but it was neither cheap nor easily available in certain cases.
Global property catastrophe rate increased around 5% and US casualty reinsurance pricing showed signs of revival, compared with more subdued levels in the overall property lines.
S&P largely sees pricing changes as in line with its midyear 2019 predictions, and continues to characterise reinsurance as firming, with pricing dynamics varying by region, line of business, and cedant’s performance.
In addition, the constrained retrocession capacity, caused by trapped collateral due to catastrophe losses and loss creep, will continue to exert its influence on hard pricing in the retrocession market.
“Overall reinsurance pricing is improving because views of risks are changing and risk appetites are adjusting while the sector still faces secular headwinds,” said S&P Global Ratings credit analyst Taoufik Gharib.
He added: “We expect the industry will carry some of this positive pricing momentum into the upcoming major renewals, notably in Japan in April and in Florida in June.”
Looking ahead, S&P is anticipating significant rate increases for the upcoming Japanese and Florida renewals.
In Japan, the typhoons in 2019 and adverse loss developments on Typhoon Jebi is likely to boost pricing above April 2019 levels, which were in the 15-25%.
And in Florida, market dislocation could support double-digit rate increases, particularly following developments on Hurricane Irma and Michael losses.
That said, analysts noted that the level of rates will depend on the balance of supply-demand., as heightened competitive pressures and restart of growth in alternative capital could somewhat cap the rate increases.
S&P continues to maintain a stable outlook on the global reinsurance sector and on the majority of the reinsurers it rates.
It bases this mainly on reinsurers’ still-robust capital adequacy and relatively disciplined underwriting so far, supported by developed enterprise risk management and an overall improving reinsurance pricing environment.
