A recent report from Jefferies suggests it is “inevitable” that reinsurance prices will not only rise at the upcoming January renewals, but will also accelerate their momentum year-on-year.
Jefferies attributes this assessment to a high level of catastrophe losses and underlying margin weakness.
In the report, the firm added, “Our confidence in this is enhanced by the fact that all industry participants appeared confident in their press releases from the recent Monte Carlo conference – an event that proceeded Hurricane Ian.”
Industry estimates for insured Hurricane Ian losses have varied since the event struck, ranging from $20bn to $65bn, though Jefferies notes that recent statements perhaps imply a lower loss.
The CEO of Florida’s state-backed insurer Citizens, estimated around $40bn, or the lower end of the company’s $30bn-$67bn range.
Swiss Re profit warned ahead of 3Q 2022 results, reporting storm losses of $1.3bn. Presuming that Swiss Re has a market share of c.3%, this implies only $43bn of industry claims, suggests Jefferies. As a result, the firm “tentatively” estimates the industry loss to be c.$45bn.
Jefferies observes that excluding Hurricane Ian, Q3 of 2022 was not particularly costly, adding that aside from a few larger typhoons in the Pacific, the most material industry-wide changes relate to the negative development of losses from earlier this year, including the summer’s French hailstorms and Australian floods.
However, it notes, “despite this backdrop, Swiss Re disappointed today by noting that, even with a normalised catastrophe load, the P&C Re business would be unlikely to meet its combined ratio target of <94%. Looking across the sector, peers such as Munich Re could also potentially be in a similar position.
“We see this as disappointing, especially as the industry is already more than five years into this current hard market.”
Analysts at Jefferies also recently warned that it is “critical” that insurers and reinsurers exhibit a strong performance in 2023, following the huge impact of Hurricane Ian on the market.
