Catastrophes could hike reinsurance rates for U.S. insurers: Best

U.S. insurers could face higher reinsurance costs when their contracts renew on July 1, A.M. Best Co. Inc. said Monday.

Property/casualty insurers are “reeling already” with the “hurricane season yet to come,” the Oldwick, N.J. rating agency said in a special report.

Companies are evaluating the need for additional reinsurance protection against the risk that they must pay claims, Best said. It also cited Newark, Calif.-based Risk Management Solutions Inc.’s release of its updated hurricane model as a factor that could put upward pressure on rates.

How insurers manage catastrophe programs for the rest of this year will be influenced by pricing and availability of property catastrophe coverage. It also will depend on “emerging views of loss exposure” and whether the rising frequency and severity of storms seen in recent years has become the norm, Best said.

Catastrophes adding up

Best’s report, U.S. Property/Casualty—Catastrophe Review, comes as the market reacts to a series of catastrophes so far this year.

For example, Hartford, Conn.-based Hartford Financial Services Group Inc. warned investors in recent weeks about its expected losses from storms that hammered the Southeast and Midwest this year.

Catastrophe modelers EQECAT Inc. and AIR Worldwide Corp. have predicted total insured losses resulting from April tornadoes and storms would range from $5 billion and $7 billion.

Meanwhile, questions remain about the damage stemming from the March

Japanese earthquake and tsunami; EQECAT said early this month that losses could reach as high as $39 million.