Tag Archives: insurance rates

Catastrophes set to drive 2020 reinsurance rates higher

FILE PHOTO: An "Emergency shelter" sign points to the Pedro Menendez High School ahead of the arrival of Hurricane Dorian in St. Augustine, Florida, U.S., September 2, 2019. REUTERS/Marco Bello - RC1823A64B90/File Photo

By Carolyn Cohn and Lena Masri

LONDON (Reuters) – Big insurance losses from hurricanes, wildfires and other natural disasters over the past two years are set to push reinsurance renewal rates higher in January, ratings agencies said.

After falling for several years due to competition and fewer natural disasters, renewal rates have started to climb in the past couple of years and for 2020 are set to rise on average by as much as 5%.

However, as Hurricane Dorian ravages the Bahamas and bears down on the United States, Fitch, Moody’s and S&P Global said some rates could jump by much more than that.

S&P said rates would likely rise by around 5%, Moody’s expected rises of 0-5%, while Fitch predicted 1-2%, in briefings ahead of the reinsurance industry’s annual conference in Monte Carlo which begins on Saturday.

Reinsurers such as Swiss Re, Munich Re, and the Lloyd’s of London market help insurers share the risks of disasters in return for part of the premium.

“It’s not a hard market but it’s a hardening market, there’s more positive momentum,” Ali Karakuyu, lead analyst at S&P Global, told a media briefing.

Fellow analyst David Masters said the industry was likely to see “mid-single-digit price increases” as a result.

Insurers are increasingly concerned about the impact of bad weather linked to climate change, with an increase in wildfires in California among the most costly in recent years, something S&P said could see rates there jump 30-70%.

“This market remains in disarray, which will fuel further rate increases,” a slide from the S&P presentation said.

Analysts at UBS estimated that the reinsurance industry is in an excess capital position of around $30 billion, but that an estimated $70 billion of natural catastrophe losses in 2019 could erode this excess capital.

Moody’s analysts said lines of business that have been performing badly over the last few years, for example due to losses related to hurricanes in the United States, would see price rises in the mid-teens.

Fitch Senior Director Graham Coutts said he expected average rates to rise 1-2%, similar to the increases seen in January 2019, although further rises could be seen depending on the scale of losses from Dorian and other hurricanes.

(Editing by Simon Jessop/Alexander Smith/Susan Fenton)

North American commercial property insurance rates seen rising sharply in 2018

- Interstate highway 45 is submerged from the effects of Hurricane Harvey seen during widespread flooding in Houston, Texas, U.S. August 27, 2017.

By Suzanne Barlyn

(Reuters) – North American commercial property insurance rates could rise by as much as 25 percent during 2018 for properties that suffered catastrophe losses this year, according to a report on Monday by insurance brokerage Willis Towers Watson.

The commercial property insurance market, which has been soft during recent years, is now heading toward a correction, largely due to hurricanes Harvey, Irma and Maria, which together triggered one of the most destructive hurricane seasons in history, Willis Towers Watson said.

Rates for commercial properties that were not damaged, but located in catastrophe-prone areas, may increase between 10 and 20 percent, while the cost of coverage for properties in other locations could increase by up to 5 percent, Willis Towers Watson said.

Insurers around the globe are looking to raise rates after what is likely to have been their most costly quarter on record. American International Group Inc & AIG. said on Friday it would pursue double-digit rate increases and bolster reinsurance, following $3 billion in third-quarter catastrophe losses.

Hurricanes Irma and Maria alone caused as much as $135 billion in insured losses, according to modeling firm AIR Worldwide. Earthquakes in Mexico could cost billions more.

Other insurers pursuing rate increases include the Travelers Companies Inc and Chubb Ltd .

“The marketplace is going to react, and buyers need to be ready,” Willis Towers Watson wrote in the report. Insurers will have a clearer sense of their losses when policy renewals begin next year, the company said.

Auto liability rates may increase between 3 and 8 percent as insurers continue to ratchet up rates because of higher accident rates due to distracted driving and rising costs to fix damaged vehicles, Willis Towers Watson said.

Most buyers of cyber insurance, which covers certain damages if a company is hacked, will face modest increases when they renew, triggered by growth in the sector. “The cleanest risks may still see low single-digit decreases,” the report said.

 

(Reporting by Suzanne Barlyn in New York; Editing by Matthew Lewis)