Reinsurance Rates Jump on Jan. 1, With Property Prices Up an Average 50%

The global reinsurance landscape tightened significantly on Jan. 1, with one broker deeming this renewal season “one of the hardest reinsurance markets in living memory.”

Frequent natural disasters along with economic and political shifts have introduced significant uncertainty and volatility into the insurance market, along with the biggest capital crunch in more than a decade, per recent broker reports.

“The last time we saw this level of capital dislocation was during the 2008-2009 global financial crisis,” said David Flandro, head of analytics at Howden, in the firm’s latest report. “At the same time, the sector is experiencing its most acute, cyclical price increases since the 2001-2006 period, if not before.”

Howden cited Hurricane Ian as exacerbating the already difficult conditions to form one of the hardest markets in decades. In the hardest-hit line, property catastrophe reinsurance, the global rate-on-line index rose an average of 37%, the largest yearover-year increase since 1992.

On the heels of Hurricane Ian’s historic losses, U.S. insurers faced a more challenging renewal season than other regions, with property catastrophe (CAT) rates jumping an average of 50%, brokers said. New capacity came into the market in late December, allowing some cedents to push back on more aggressive attempts to limit coverage.

According to Gallagher Re, reinsurance rate increases in the U.S. ranged from 15% to 25% for loss-free, non-CAT up to 45% to 100% for programs with CAT loss histories. Gallagher Re also found a late season for U.S. programs, with many reinsurers declining to quote until after Thanksgiving. The broker also reported instances of reinsurers looking to tighten terms and conditions on property CAT programs by excluding secondary perils and covering only earthquakes and hurricanes.

Other exclusions sought by reinsurers included cyber, communicable disease, terrorism, and strike/riot/civil commotion, the broker reported.

Guy Carpenter, the reinsurance arm of Marsh McLennan, reported seeing a “stressed market,” with reinsurers calling for “pricing and structural changes unsupported by technical considerations.”

“While conditions warrant a market correction, not all outcomes were logical or sustainable,” the firm said in a statement. “Average price adjustments and increased attachment point movements were substantial across the portfolio worldwide.”

Guy Carpenter said reinsurers ultimately backed off from “more extreme coverage modifications threatening to erode the core value of the reinsurance product.” However, the broker reported progress on some issues but noted, “There is still work to complete; this is not yet a settled market.”

If you have questions about reinsurance rates and how this might affect your organization, contact your Johnson Financial Group advisor or find one today.