Over the last year or so some segments of the U.S. reinsurance market have shown signs of stabilisation in a prolonged softened market, that’s underlined by ample capacity and persistent rate declines. And, after the impacts of recent hurricanes in the U.S., Munich Re’s Steve Levy expects pricing trends to alter for U.S. property catastrophe reinsurance.
Steve Levy is the President of the Reinsurance Division at Munich Reinsurance America, Inc., the U.S. arm of Munich Re. In a recent blog on Levy’s Linkedin page, he discusses the recent impacts of hurricanes Harvey, Irma and Maria, offering some of his thoughts on the events.
As with the rest of the industry, Levy stressed that it’s still far too early to understand the full financial impacts of the events, which left many dead and caused widespread damage in parts of the U.S. and the Caribbean.
“Based on the ultimate scope of industry losses from these storms, we expect a shift in pricing trends for U.S. property catastrophe reinsurance. Furthermore, it’s likely that other market segments will be similarly impacted if the losses are at the high end of current estimates or if we have one or more additional major events this year,” says Levy.
With the volume of capacity in the global reinsurance industry still so high, it’s believed that a substantial amount needs to leave the market before a turn in pricing can materialise. Despite the combined impacts of the hurricanes and earthquakes in Mexico, with the financial element still unknown, it’s uncertain how broad any price movements will be.
Plus, with a reported large volume of capacity sat on the sidelines waiting to enter, any post-event price movements are expected to be limited.
“Finally, the retrocessional market will likely be impacted given that the large share of this market is represented by alternative capital and the potential for a fair amount of collateral to be locked up until the losses from these storms more fully developed,” he continues.
