Reinsurance News

Insurance Australia Group (IAG) said that it experienced “modest upwards pressure on like-for-like reinsurance rates” as the firm renewed its $8 billion catastrophe reinsurance program, confirming that the slight hardening of the market reaches to regions unaffected by recent major events.

The first insurance-linked securities vehicle to be approved and launched in the UK, the NCM Re (UK PCC) Ltd vehicle from specialist Lloyd’s and Bermuda insurance and reinsurance company Neon Underwriting, has successfully completed the first UK ILS transaction, entering into a $72 million quota-share with Neon’s Syndicate 2468.

Reinsurance broker JLT Re reports that “selective firming” was seen in global property catastrophe reinsurance rates at the January 1st 2018 renewals, helping the firms Risk-Adjusted Global Property-Catastrophe Reinsurance Rate-On-Line Index to a 4.8% rise, the first increase since 2011/12.

Dutch pension fund manager PGGM has secured a second issuance from its collateralised reinsurance sidecar, as the Leo Re Ltd. vehicle issued a $140 million Series 2018-1 Class B tranche of notes, shortly after issuing a $260 million Class A tranche earlier in December.

The availability of risk capital has curtailed reinsurance renewal rate rises at the key January 1st 2018 contract signings, with global property catastrophe and risk programs only seeing average risk adjusted price rises of 0% to 7.5%, according to broker Willis Re.

The decoupling of reinsurance pricing and expected reinsurance losses is “a less-than-ideal business model” according to analysts at Keefe, Bruyette & Woods, who feel that price hikes tend to be a reaction to losses, rather than being commensurate with a changing view of risk.

Negative returns have continued for a number of insurance-linked securities (ILS) and reinsurance or retrocessional linked investment funds in November, as some reserve strengthening has been required for prior month catastrophe events and a few ILS funds have been hit by the California wildfires.

While the record levels of third-quarter catastrophe losses are expected to “crystalize a turning point” by the equity analysts at Morgan Stanley, the team believe that this any post-loss turn in rates will be more durable in primary insurance lines than in reinsurance or retrocession.

Severe thunderstorms that struck the Victoria and Melbourne region of Australia on December 19th, bringing strong winds, large hail and flash flooding, are estimated to have already resulted in over AU $105 million of claims, a figure that is expected to rise significantly.

Ratings agency Standard & Poor’s (S&P) has forecast that global reinsurance rates will rise by between 0% and 5% in 2018, with the potential for double-digit price increases in loss-affected lines, but notes that it needs to see more discipline from reinsurers as well.