Reinsurance renewal hikes ‘widely dispersed’: Analyst
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Reinsurance rate increases at June 1 renewals should average in the mid-teen percentages, according to a research note Friday from analyst Keefe, Bruyette & Woods Inc.
Rate increases, however, were “very widely dispersed” as differences in individual loss experience, geographic exposure and market timing led to “cedent-specific increases,” KBW said, adding the cycle was characterized by “improved market discipline” led by reinsurers including RenaissanceRe Holdings Ltd.
The analysts also noted that current reinsurance pricing “remains well below previous peaks” as the “current increases follow June 2018’s very modest increase that followed six consecutive years of compounding – occasionally double-digit – rate decreases.”
Retrocessional pricing is rising by at least 25%, KBW said. The analyst noted Markel CATCo, the specialist asset manager of Markel Corp., “widely seen as very low-cost retrocessional capacity,” according to KBW, “is reportedly not renewing any business at mid-year,” the analyst said.
The rising market is due to reinsurers’ “changing view of risk after two years of significant catastrophe losses including material loss “creep” for Hurricane Irma, Typhoon Jebi, Hurricane Michael, and the un- or under-modeled California wildfire losses,” KBW said in its note.
Reinsurance capacity is widely regarded as “adequate,” according to KBW, and insurance-linked securities continue to provide capacity to the reinsurance sector, albeit on a somewhat more selective basis, according to KBW.
“By all accounts, ILS capacity is still viewed as a permanent component of the catastrophe reinsurance ecosystem, although investors are now more selective about the asset managers with whom they will partner,” the analysts said in the note.
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