A new report by Moody’s suggests reinsurers are to remain well-positioned for the rest of the 2018 hurricane season, which officially runs from June 1 to November 30.
Experts predict near-historical storm averages for the Atlantic Basin, cooler-than-average sea-surface temperatures across the tropical North Atlantic, strong trade winds and sea level pressures and a neutral or weak El Niño.
Moody’s believe’s reinsurers are entering the hurricane season with solid capital positions to withstand potential losses arising from hurricane events, despite last year’s large losses.
Forecasts call for an average of 13 names storms during the 2018 season, with six of these storms becoming hurricanes, of which three could reach major hurricane status.
Reinsurers’ capital levels were not significantly affected by last years’ catastrophe events, with only a few mid-tier reinsurers focused on property cat and specialty business reporting capital decreases at year-end.
Additionally, a number of players discontinued share buybacks and recapitalised and upsised alternative capital vehicles, including ILS funds and sidecars, during the last months of 2017 and the first quarter of 2018. As a result, Moody’s believes reinsurers are well positioned to manage potential hurricane losses.
Suppressed by overabundant capacity and intense competition from alternative sources, US property/casualty pricing experienced only moderate increases on loss affected accounts post-2017.
According to broker JLT Re Florida, one of the most hurricane-exposed areas in the US, P/C reinsurance rates increased by 1.2% on average at the June 1 2018 renewal and remain 40% below 2012 levels.
