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Uri losses to sustain reinsurance rates through mid-year: KBW

3rd March 2021 - Author: Matt Sheehan

Analysts at KBW have reported that the industry expects losses from Winter Storm Uri to sustain property catastrophe reinsurance rate increases through the mid-year renewals period.

profitable-growth-reinsuranceAccording to KBW, most re/insurance executives view a $10 billion to $20 billion loss range as reasonable for Uri, which has brought damaging ice damaging ice in the US Northwest and freezing temperatures across the Midwest and Northeast.

While these losses are seen as manageable, they should help to support the momentum in reinsurance rates that has been built over the past year, analysts say.

KBW believes that the sentiment among reinsurers seems to be moderate optimism for higher Japanese wind rates at the upcoming April renewals.

And for the June and July renewals, persistent catastrophe event frequency and a focus on more heavily loss-impacted accounts should help to boost rate increases.

KBW’s view is that the 1/1 reinsurance renewals were more disappointing for investors than reinsurers, even though property catastrophe and retrocessional reinsurance rate increases trailed Monte Carlo 2020 expectations

Instead, the firm says that casualty and specialty reinsurance lines’ rates, terms, and conditions “all point to significantly improving returns.”

Turning to personal lines insurance, KBW noted that pricing is declining modestly as insurers respond to 2020’s lower-than-expected claim frequency.

That said, homeowners rates should rise in response to recent losses and rising reinsurance costs, but rising construction materials costs could limit margin expansion.

In commercial lines, meanwhile, rate increases are persisting – and in some cases still accelerating – for most commercial lines of business, with bigger increases for bigger and more specialty accounts.

And for brokers, KBW remains confident in P&C rate increases as an organic revenue growth driver, likely augmented by exposure unit growth when the economy recovers.

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