Double-digit reinsurance price increases may extend into 2021: Fitch

Share

The reinsurance market may enjoy further double-digit price increases at the renewals in early 2021, but with capital now flowing into the sector Fitch Ratings warns that this will inevitably halt the rate momentum.

fitch-ratings-logoThe good news is that reinsurance rates are catching up with the primary market, resulting in a more balanced pricing environment that may prove more sustainable this time around.

Fitch Ratings highlights the numerous factors driving reinsurance rates, saying that “pressure from large property losses, increased liability losses, higher retrocessional pricing and persistently low interest rates” plus the “significant losses expected from the fallout of the coronavirus pandemic” have all combined to drive the most sustained period of firming seen for some years.

“Reinsurance prices hardened for June renewals amid lower retro capacity, with all market sectors generally pricing more conservatively,” Fitch said, noting that while weighted towards catastrophe exposed programs, “reinsurance rates were up 20%-30% for most Florida renewals, with 50%+ increases for some higher risk accounts.”

The potentially limiting factor for reinsurance rate increases is new capital flowing in, with some $5 billion or more of equity raises already seen in the sector, plus billions raised from secondary offering by public re/insurers and privately held firms have raised capital from their investors, private equity players, or issued new debt all to recapitalise.

Fitch is not expecting a raft of new start-ups though, saying that it expects existing players to look to grow more quickly through, “tie-ups with PE companies and side cars” which the rating agency sees as more likely to be used to raise and deploy capital, scaling “existing reinsurers more so than start-ups or new market entrants,” as it sees new players facing more inherent challenges in getting up to speed.

“While favorable pricing trends are poised to continue in 2021, inevitably this large influx of underwriting capacity will halt this rate momentum,” Fitch warns.

Also read: Walking a capital raising tightrope between glory & rate pressure.

———————————————————————
Artemis Live - ILS and reinsurance video interviews and podcastView all of our Artemis Live video interviews and subscribe to our podcast.

All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance video content and video interviews can be accessed online.

Our Artemis Live podcast can be subscribed to using the typical podcast services providers, including Apple, Google, Spotify and more.

Print Friendly, PDF & Email

Artemis Newsletters and Email Alerts

Receive a regular weekly email newsletter update containing all the top news stories, deals and event information

  • This field is for validation purposes and should be left unchanged.

Receive alert notifications by email for every article from Artemis as it gets published.

Read previous post:
Best of Artemis, week ending 28th June 2020

Here are the ten most popular news articles, week ending 28th June 2020, covering catastrophe bonds, ILS, reinsurance capital and...

Close