Reinsurance rate hikes lose momentum: Willis Re

Property catastrophe reinsurance rates fell by up to 7.5% during midyear renewals for accounts that did not report losses, Willis Re said in its reinsurance pricing report on Monday.

While loss-hit insurers saw moderate increases in their property reinsurance costs, the pricing trend “evidences a market that has seen the momentum for rate increases on non-loss impacted accounts dissipate,” the London-based reinsurance brokerage said in the report.

In its January renewal report, published a few months after the devastating 2017 hurricane season, Willis Re reported that loss-free accounts were seeing renewals ranging from flat to up 7.5%.

The main drivers behind the midyear reductions are: excess capital in the traditional and nontraditional reinsurance markets; stabilization of 2017 catastrophe loss estimates, which often fell within the retentions of large insurers; and the low level of catastrophe losses in the first half of 2018, the Willis Re report said.

Detailing rate changes by region, the report found that loss-free property catastrophe reinsurance accounts in Florida saw renewal rate changes ranging from flat to down 7.5% and U.S. nationwide accounts saw flat-to-down 5%. In the Caribbean, which was hit hard by last year’s hurricanes, loss-free accounts saw increases of 5% to 15%

For accounts that reported catastrophe losses, rate changes in Florida were flat to up 7.5%, U.S. nationwide accounts were up 5% to 10%, and cedents in the Caribbean saw 10% to 40% increases, according to Willis Re.

Casualty reinsurance rates varied by line, with moderate decreases or increases, according to the report, although U.S. auto liability rates on loss-hit excess of loss accounts increased 12%.

Reacting to the “emerging new market normal,” reinsurers are adjusting their business models to reduce costs and exit unprofitable lines of business, Willis Re said.