Two many years of higher-than-expected losses from natural catastrophes will probably prompt average reinsurance rate renewal rises as high as 5% in January, ratings agencies said.
After many years of falling rates due to competition and much less disasters, steep losses from hurricanes, typhoons and wildfires in 2023 and 2023 are driving a reversal.
And as Hurricane Dorian ravages the Bahamas and bears recorded on the US, both Fitch and Standard & Poor’s said some rates could jump higher.
S&P said rates may likely rise around 5%, while Fitch predicted 1-2% in briefings ahead of the reinsurance industry’s annual conference in Monte Carlo which begins on Saturday.
Reinsurers such as Swiss Re, Munich Re and the Lloyd's based in london market help insurers share the potential risks of disasters to acquire area of the premium.
“It’s not really a hard market but it’s a hardening market, there’s more positive momentum,” Ali Karakuyu, lead analyst at S&P Global, told a media briefing.
Fellow analyst David Masters said the was likely to see “mid-single digit price increases” as a result.
Insurers are increasingly worried about the impact of rainwater linked to climate change, by having an rise in wildfires in California among the most costly recently, something S&P said could see rates there jump 30-70%.
“The forex market remains in disarray, which will fuel further rate increases,” a slide from the S&P presentation said.
Fitch Senior Director Graham Coutts said he expected average rates to rise 1-2%, similar to the increases observed in January 2023, although further rises might be seen with respect to the scale of losses from Dorian and other hurricanes.
