India likely to see reinsurance rates harden by 20%+ at renewals

With the 1st April renewals just around the corner the reinsurance market is awash with speculation of just how much rates are likely to rise in both catastrophe hit regions and also the major markets of the U.S. and Europe. The majority of the April renewals focus will be on regions such as Asia Pacific but there are some property and catastrophe reinsurance programs which renew in the U.S. as well which should give us a reasonable idea of which way rates are heading and by how much.

Asian countries which were hit hard by disasters are likely to see large rate rises, with some citing rises of as much as 50% on certain lines in Japan and Thailand, the two worst countries hit the worst by catastrophes in 2011. How other countries will fair has been much discussed with some suggesting a region-wide 15% minimum increase for Asia Pacific.

The Business Standard, one of India’s biggest financial news carriers, has an article today suggesting that India is expecting reinsurance rate rises of 20%-25% across the board. Reinsurers have been insisting on capping single limit covers and no unlimited covers are available as reinsurers reign in their offering in the country. Insurers are also being asked to provide additional disclosures to bind policies, including more details on profitability, capacity and loss ratios of their portfolios.

The article suggests that this is beginning to filter down to insurance renewals for large corporates and price rises of up to 20% are being passed along in advance of the renewals.

In the U.S., the Insurance Insider reported yesterday that Chubb, one of the largest insurers in the U.S., are expecting to pay around 10% more for its catastrophe excess of loss program renewal. Apparently this is the largest property catastrophe renewal in the market at the April renewals and so a good barometer for where rates will go at mid-year in the U.S.

Of course, this is likely to lead to much discussion of the favorite topic of re/insurance market participants. Is a 10% rate rise enough to bring on a hard market? We’ll have to wait for the mid-year renewals to find out. We’ll also be keeping a close eye on renewals to see what, if any, impact they have on the catastrophe bond and ILW market and rates there.