Ratings agencies see falling reinsurance rates despite HarveyReprints
(Reuters) — Global reinsurance rates are likely to fall by up to 7.5% at January 2018 renewals due to strong competition, despite the impact of Hurricane Harvey, ratings agencies said on Tuesday.
Reinsurers, who help insurers shoulder the burden of large losses in return for part of the premium, meet next week at their annual conference in Monte Carlo to hammer out next year's deals with insurers.
Reinsurance rates have been falling for several years due to competition in the sector, including new entrants, and also due to declining demand following low levels of natural catastrophes in the developed world.
Harvey, which may have caused $10 billion to $20 billion of insurance losses according to estimates, is not large enough to reverse the declining trend, analysts from S&P Global Inc. and Fitch Ratings Inc. said.
"You’d need to see a bigger (catastrophe) event to really have some impact on price," Dennis Sugrue, senior director at S&P Global, told a briefing.
Mr. Sugrue expected rates to fall by up to 5% at January 2018 renewals.
Moody's Investors Service Inc. also said this week that Harvey was unlikely to affect global property reinsurance rates.
Graham Coutts, EMEA head of reinsurance at Fitch, told a separate briefing that rates might fall by up to 7.5%, following similar declines at July renewals.
However, further U.S. hurricanes could lessen those declines, he said.
Hurricane Irma, a powerful Category 5 storm, headed toward the Caribbean and the southern United States on Tuesday as islands in its path braced for possible life-threatening winds, storm surges and flooding.
"It very much depends on what happens in the rest of the hurricane season," Mr. Coutts said, adding that if Irma were to hit Florida, "you might see a flatter renewal."
Insurance specialists expect rates to rise in areas directly affected by Harvey, however, due to increased demand for flood insurance.
"It will lead to some further localized (price) tightening in and around coastal areas and probably more specifically Houston," Duncan Ellis, U.S. property practice leader at broker Marsh L.L.C., said.