Insurers, reinsurers to get 5% to 20% hikes: Morgan Stanley

Commercial property/casualty and reinsurance pricing will improve 5% to 20%, largely as a result of substantial 2017 catastrophe losses, but increases could be blunted by the presence of ample alternative capital, according to research Wednesday from Morgan Stanley Co.

The bank said early indications put property catastrophe reinsurance renewals up 5% overall, with loss impacted accounts seeing hikes of 10% to 20%, loss free accounts increasing 0% to 5% and retrocession up 10% to 20%.

The early indications of a 5% overall rate increase was “lower than we anticipated,” the research note said.

Morgan noted that the market had seen cumulative reductions of some 50% over the past five years, and that 2017 catastrophe losses are now estimated as high as $136 billion by Swiss Re.

Increases will also extend to primary insurance, Morgan Stanley said, with property increases as high as 15% to 25% for loss impacted businesses and casualty rates up in the single digits.

Alternative capital, however, could blunt the magnitude and duration of any increases, Morgan Stanley said. It has been a “key driver” of property catastrophe rate decreases in recent years and could absorb $10 billion to $20 billion of the recent catastrophe losses.

While the losses could tie up some of the available capital, Morgan Stanley said investors appear ready to “reload,” albeit with higher returns.