Cat exposed US property hammered with large increases in Q1: MarketScout

Catastrophe exposed property insurance rates in the United States rose significantly again in the first-quarter of 2021, continuing the trend seen through last year, according to MarketScout.

The final quarter of 2020 saw property insurance rates surging in catastrophe exposed zones, led by hurricane exposed property in Florida and wildfire exposed property in California.

That continued through the first three months of 2021, with MarketScout reporting that “catastrophe prone areas continue to be hammered with large increases.”

In commercial property and casualty insurance across the United States, MarketScout reports that “Underwriters continue to push rates across the board.”

The property insurance market, which is perhaps the most relevant to our insurance-linked securities (ILS) and reinsurance capital focused audience, continues to experience rising rates.

Richard Kerr, CEO of MarketScout, explained, “Because the property market is so large, the composite rate is tempered by placements across the US. In CAT prone areas, rates were up significantly more than the composite rate of 8.6 percent.”

Commercial insurance pricing is rising strongly and Kerr expects these trends will continue, saying, “We expect rate increases to continue for the remainder of 2021.”

Personal property insurance rates rose particularly fast once again in catastrophe exposed regions, perhaps worth venturing that these regions are also considered some of the most climate risk exposed.

Kerr said, “While rates moderated slightly, the market continues to harden for homeowners in Florida and California. Insurers are cutting back and homeowners are paying the price. If you own a CAT exposed home in Florida or in a wildfire prone area in California, the rate increases can be as much as 25 to 30 percent.”

Higher value homes of over $1 million saw the steepest increases on average, at 6.7%, while lower value homes saw a 5% rate increase in Q1 2021.

We continue to believe conditions in the primary market are a key driver for reinsurance pricing, with insurers seeking to get their rates to risk commensurate levels, particularly in catastrophe and climate risk exposed areas, and the reinsurance market following-suit.

Alongside the other factors stimulating pricing in primary and reinsurance lines, the continued momentum in primary property pricing should help to keep reinsurance firm at least for the coming few quarters.

Beyond that, it will depend whether primary rates plateau, or risk appetite of large players and new capital serves to stop rate momentum in its tracks.