Big reinsurers banking on large rate hikes at 1 Jan

The world’s largest reinsurers will push for substantial rate increases at 1 January renewals, with Scor predicting the market is set to see substantial, multiyear price rises.

Speaking during events and meetings at the Rendez-Vous de Septembre reinsurance meeting in Monte Carlo this week, top executives Europe’s big four reinsurers said rates will rise at year-end as demand for reinsurance increases but total market capacity has shrunk.

They didn’t give specific predictions for the size of rates increases, however.

Premium increases for US property-catastrophe risks will be “very material” at year-end to reflect increased inflation and rises in exposure, said Jean-Jacques Henchoz, CEO of Hannover Re.

Property cat rates will also rise globally, reflecting increased losses, he said.

“After a few years of heightened activity, we need to see significant adjustments to the terms and conditions,” Henchoz said.

Increased inflation will lead to economic volatility, said Torsten Jeworrek, chair of Munich Re’s reinsurance committee.

“The next renewal is much, much more challenging than last year’s where we had a much more economically stable environment,” he said.

Worldwide dedicated reinsurance capital has declined from $475bn in 2021 to about $435bn in 2022, Jeworrek said.

Meanwhile, modelled loss costs – including materials, labour and other factors – have increased by 20% during the past 12 months for some property exposures in North America, said Marcus Winter, president and CEO of Munich Re in the US.

“There have been price increases on the reinsurance side but not to the extent that is necessary, and that’s why we expect significant price corrections in the next 12 months,” he said.

Demand for reinsurance coverage saw some cedants return to the market for additional capacity after the 1 June and 1 July renewals were completed, Winter said.

Thierry Léger, group chief underwriting officer at Swiss Re, said a higher concentration of people in catastrophe-exposed areas, increased insurance penetration and rising wealth are the main drivers of higher reinsurance property claims.

The effects of climate change will also drive up claims, he said.

But Léger noted that “only 20% of the increase between now and 2040 will be due to climate change”.

The reinsurance market is at a similar inflection point as the insurance market five years ago, when substantial, multiyear rate increases began, said Laurent Rousseau, CEO of SCOR.

“I’m convinced that today at this stage, we are seeing actually in reinsurance what we saw in insurance in 2017,” Rousseau said.

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