It Doesn’t Take a Weatherman to Forecast 2020 Reinsurance Price Hikes Due to Hurricanes
Ratings agencies like Fitch, Moody’s and S&P Global are expecting higher reinsurance renewal rates in 2020, caused by big insurance losses from hurricanes, wildfires and other natural disasters over the past two years.
For several years we’ve grown used to rates falling due to competition and fewer natural disasters. Renewal rates are set to rise on average by as much as 5% in 2020. S&P said rates would likely rise by around 5%, Moody’s expected rises of 0-5%, and Fitch predicted 1-2%.
According to S&P’s lead analyst Ali Karakuyu, “It’s not a hard market but it’s a hardening market, there’s more positive momentum.” 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 costliest in recent years, something S&P said could see Golden State rates jump 30-70%. The market is in disarray, which may fuel further rate increases.”
Analysts have estimated that the reinsurance industry is in an excess capital position of around $30 billion – 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.
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From Reuters and Insurance Journal