So far this year, property catastrophe reinsurance rates-on-line in the U.S. have risen by almost 15%, representing the largest increase in the Guy Carpenter U.S. Property Catastrophe Rate on Line Index since 2006.
Reinsurance broker Guy Carpenter’s index is a proprietary index of U.S. property catastrophe reinsurance rate-on-line movements, so offers a way to measure catastrophe reinsurance pricing in the U.S. market.
It’s the longest-standing source of insights into U.S. catastrophe reinsurance pricing, as the reinsurance brokerage has been maintaining the index since 1990. The data comes from brokered excess-of-loss reinsurance placements.
The company updates the index after the important January 1st and July 1st reinsurance renewals, and it’s calculated by examining the changes in rate-on-line year-on-year across the same renewal base.
Now updated after the July renewals, the data shows that, for 2022 so far (January through July 2022 renewals), the index rose by 14.8%, taking rates-on-line to their highest level since 2009.
In fact, a spike of this level hasn’t been seen in the index since 2006. The chart shows that rates have been on the rise since 2017, and with consecutive years of reinsurance price hikes across the U.S. property catastrophe space, the index is actually more than 50% higher than it was at that stage.
Many regions, and notably for catastrophe loss exposed programs, experienced some of the steepest price hikes at the mid-year reinsurance renewals, resulting in a difficult renewals for some amid a pull-back from providers of capacity in an effort to lower volatility on the back of elevated loss costs.
Speaking last week during Marsh McLennan’s Q2 2022 earnings call, Dean Klisura, President and Chief Executive Officer (CEO) of Guy Carpenter, which is the reinsurance broking arm of Marsh McLennan, said that the first half of 2022 “was the most challenging property market we have seen in a number of years.”
He added that the June 1st renewal was especially challenging, “as we saw property cat capacity readily constrained globally, with particular challenges in the U.S. and London wholesale market.”
You can analyse Guy Carpenter’s data on Artemis, our insurance-linked securities (ILS) focused sister-site.
