January reinsurance renewal rate increases were “modest and increasingly regionalized” without overall trends, and ranged from flat to up 3% on average, S&P Global Ratings Inc. said Thursday in a sector report.

The renewals followed an estimated $80 billion in catastrophe losses in 2018, the fourth-highest insured catastrophe year since 1980, “with reinsurers left holding the bag for an estimated quarter of the losses,” New York-based S&P said, adding the losses likely exceeded expectations.

“We expect 2018 losses to exceed the catastrophe budgets baked into the reinsurance sector’s earnings,” S&P said.

Renewal increases, however, fell short of expectations, according to S&P, and rate hikes became more focused.

“Based on our initial discussions with reinsurers and review of brokers’ reports, rate increases during the January 2019 renewals were somewhat disappointing,” S&P said.

“We saw more and more regionalization of reinsurance pricing,” continued S&P. “We no longer witness a rising tide that lifts all boats, but rather, targeted price increases limited to policies and regions that were affected by losses without any spillover effect to other lines of business or regions.”

In the U.S., loss-free accounts were flat to down 2.5%, while loss-hit accounts could be up as much as 10%, according to S&P data. Catastrophe-exposed loss-free accounts could be up 5% but down 2.5%, while catastrophe loss-hit accounts were up 5% to 20%.

2017 was the third-highest insured catastrophe year since 1980, after 2005 and 2011, all according to Munich Reinsurance Co.’s natural catastrophe analysis tool, NatCatSERVICE, S&P said.

A dip in the flow of alternative capital is not expected to last, the report noted. “The alternative capital influx seems to have slowed recently, but we think it won’t be an ongoing trend,” S&P said. “Despite third-party capital’s rapid growth pausing for now, we think it’s temporary and its ascendance will likely continue.”

Although the global reinsurance sector “continues to weather unfavorable and continuously difficult business conditions,” S&P Global Ratings maintains a stable outlook on the sector and on the majority of the reinsurers it rates for the next 12 months, it said.

JLT Re sees similar trends

JLT Re also saw the alternative capital pullback, noting “early analysis indicates that alternative capital growth in 2018 abated for the first time since the global financial crisis,” in its own report issued Thursday, attributing the decline to several factors including “continued loss creep from Hurricane Irma and another series of costly catastrophe losses in 2018.”

The reinsurance broker also saw similar pricing indications.

“Despite another active catastrophe year in the United States, property-catastrophe rate changes were modest at 1 January 2019,” JLT Re said.

“Loss-free layers saw relatively muted movements, typically falling within a range of flat to down 5%. Strongly performing accounts renewed towards the lower end of this range while loss-impacted layers generally saw price rises, but outcomes varied depending on losses, geographies, exposures and relationships,” the broker continued.

Venturing further into the weeds, however, JLT Re found that “a number of lines in the US casualty reinsurance market showed early signs of upward pressure as reinsurers navigated an uptick in loss ratios and an increase in the frequency of severe losses.”

The broker did concur that pricing did not align with expectation.

“Reinsurance renewals at 1 January 2019 broadly defied early expectations of post-loss firming for the second consecutive year,” JLT Re said.

This could be a harbinger for the next 12 months, according to Ross Howard, executive Chairman & interim Global CEO for JLT Re.

“The 1 January renewal provides an early glimpse into how the reinsurance market is likely to develop in 2019,” he said in a statement released with the report.