April renewals suggest cat reinsurance prices can go higher: Moody’s

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The recent April reinsurance renewals season has provided further details on 2022 pricing trends and reinsurers’ catastrophe risk exposure profile, which has led Moody’s to believe that property catastrophe reinsurance pricing still has room to go higher.

ils-post-event-growthDue to the recent renewals delivering strongly, several factors created upward pricing pressure, and now analysts at Moody’s have forecasted for 2022 to see an ongoing rise in pricing around catastrophe reinsurance.

The analysts added that weak sector profitability in recent years from above-average catastrophe losses is one factor.

While, inflationary pressures are elevated and persisting, driving further reason for pricing to increase.

As an increasing focus on the impact of climate change on catastrophe event frequency is heightening risk aversion among some reinsurers and resulting in challenges in placing some structures and perils, as well as a continued focus on named peril protection.

At the same time, continued strong demand from ceding companies means capacity is in-demand.

With tight supply conditions in the collateralised retrocessional market also continuing and suggesting limitations on capacity for certain products once again.

All of which point to higher pricing within catastrophe reinsurance for the months ahead, Moody’s believes.

Moody’s also added that the June/July renewals in Florida will provide further details on these pricing trends and risk exposure profiles too.

Meanwhile reinsurance broker Gallagher Re, reported that property catastrophe treaty reinsurance rates saw modest, single digit increases, as the April renewals passed in a largely orderly manner.

The reinsurance broker also reported that there was widespread discussion about inflation during the April renewals, as reinsurers were keen to understand its impact on cedants’ portfolios.

Furthermore, James Vickers, Chairman International, Reinsurance at Gallagher Re, stated that the calm April renewals were dominated by an orderly Japanese market.

As we explained earlier today, pricing is rising in the catastrophe bond market, as evidenced by spread widening of recent issuances and reflecting some of the trends seen more widely in reinsurance.

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