Reinsurance News

Reinsurance rates to accelerate, but buyers will struggle to fill towers: Survey

25th May 2022 - Author: Luke Gallin

Market participants are confident that reinsurance rate increases will accelerate further at the mid-year 2022 renewals, while buyers of protection will find it challenging to procure the desired level of coverage, according to data from the latest Reinsurance News market survey.

rate-acceleration-renews-2022-midyear-surveyThe survey, undertaken in collaboration with our insurance-linked securities (ILS) focused sister-site, Artemis, includes responses from hundreds of identifiable market participants, of which 70% make or provide input into reinsurance buying decisions.

With the mid-year renewals fast approaching, much of the focus is on the Florida-dominated June 1st, 2022, renewals, given the myriad of issues that continue to stress the state’s troubled property insurance market.

Russia’s invasion of Ukraine is another uncertainty for carriers, and although Q1 reporting suggests the ongoing war will most likely be an earnings event for the re/insurance industry, it will take time to see what happens in certain lines of business such as aviation.

Remember that this is all happening on the back of another above-average year of natural catastrophe losses for carriers in 2021, the lingering impacts of the pandemic, and a fairly active first-quarter, in terms of losses.

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With this in mind, we thought it would be a good time to test the temperature of the global reinsurance market.

The data reveals that more than 65% of respondents anticipate an acceleration of reinsurance price rises at the mid-year renewals when compared with the January 1st, 2022, renewals. Just under 31% expect rate increases of a similar magnitude to what was seen at 1/1, while just 4% expect reinsurance rate increases to slow.

Given the recent loss experience it’s not surprising that the overwhelming majority of survey respondents forecast greater price rises at the mid-year than the levels seen at 1/1. However, just how high prices go remains to be seen and, importantly, it’s unclear whether any hikes will be sufficient to entice reinsurers to the difficult Florida property catastrophe market.

According to respondents, buyers of reinsurance protection will face difficulties when trying to place their programs at the mid-year.

In fact, just shy of 60% feel it will be very challenging for buyers to fill their reinsurance towers at the mid-year renewals, while 33% expect it to be slightly challenging. Showing how tough the renewals is expected to be at June 1st, just 8% of survey respondents said it will not be at all challenging to fill reinsurance towers at the mid-year.

As Florida’s property insurance market grapples with rising litigation and fraud, alongside the impacts of storms, reinsurer appetite for the exposure has faded significantly.

As a result, and as shown by the survey results, the view across the market is that some carriers will find placing 100% of their towers a real challenge, and therefore risk going into the 2022 Atlantic hurricane season, which commences on June 1st, with more risk on their balance sheets.

We’ve made the full results of this global reinsurance market survey freely available to our readers and we’re happy to discuss the results with industry participants and to discuss sponsorship enquiries from those looking to raise their profile in the reinsurance sector. Contact us.

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