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(Reuters) — Ratings agencies Moody's and S&P Global said on Tuesday they expected global reinsurance premium rates to rise at the key January renewal season as companies seek to recoup some of their COVID-19-related losses.
The pandemic is expected to lead to as much as $100 billion in losses for non-life insurers due to claims from businesses hit by event cancellations and other disruptions.
Reinsurers share the burden of large losses with insurers in return for part of the premium.
Reinsurance rates were on a downward trend in recent years due to strong competition, until heavy losses from natural catastrophes in 2017 started to turn the trend.
Rate rises in January 2021 are likely to be in the “high single digits” of percentage points, Moody's analyst Antonello Aquino told a media briefing, while S&P Global analyst Charles-Marie Delpuech told a separate briefing the firm expected rate rises in the mid-single digits.
Fitch Ratings also said last week it expected rate rises in the low doubt-digit percentage point range.
Global reinsurer Swiss Re also said on Tuesday it was optimistic for renewals and expected price increases across all segments to continue to be driven by low interest rates, large claims and growing risks.
The ratings agencies were downbeat on the outlook for reinsurers, given the COVID-19 dent to their profitability.
Moody's cut its ratings outlook for global reinsurers to negative from stable on Tuesday, citing the pandemic and subsequent economic downturn, as well as the longer-term impact of climate change on natural catastrophe losses.
S&P Global retained a negative outlook for the sector.
The ratings agencies usually update their outlooks ahead of an annual reinsurance event in Monte Carlo each September. The event is canceled this year.