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April and June reinsurance renewals will likely see further price firming after January renewals saw limited increases, according to a note Thursday from Fitch Ratings Inc.
April renewals, which include Asian insurers, and the Florida-focused June renewals “are ripe for more sizable reinsurance rate increases given that these accounts were most affected by catastrophe losses,” Fitch said in the report.
The rating agency added, “the recent January 2020 renewal season fell below expectations, ” with European property reinsurance rates flat to slightly down on limited losses and abundant capital. In the United States, property market, “meaningful” rate increases were limited to loss-affected areas, while accounts not hit by losses were flat to up slightly as pricing increases were again limited by strong capital levels.
Bermuda insurers and reinsurers, which the report focuses on, will face “intense pricing competition and low investment yields amid robust levels of capital, which will continue to limit profitability over the medium term,” Fitch said, even with higher prices.
The group of nine Bermuda-based insurers and reinsurers Fitch actively follows had a 2019 estimated combined ratio of between 96% and 97%, compared with 99.5% in 2018, Fitch said.
Alternative reinsurance capital contracted $4 billion in through the first nine months of 2019 to $93 billion from the prior year. “However, capital market participation will likely resume in 2020 as investors return to the ILS market, driven by improved return opportunities,” Fitch said.