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Ian, inflation complicating property reinsurance market: Experts


DALLAS – Macro-economic factors such as inflation will exacerbate insured losses from Hurricane Ian and the mismatch in supply and demand in the property catastrophe reinsurance market at Jan. 1 renewals, according to a panel of experts.

They were speaking during a session of the American Property Casualty Insurance Association annual meeting in Dallas on Monday.

Inflation and catastrophe losses are adding to the supply-demand imbalance in property catastrophe reinsurance, said Paul Anderson, executive managing director, U.S. property growth leader at Aon PLC.

“We’ve seen an increase in cat losses over the last five years,” which has challenged reinsurers to think about how much capacity they might deploy going forward, Mr. Anderson said.

At the same time, reinsurance buyers are seeking additional capacity to account for inflation, “whether that’s some $10 billion or $20 billion” based on assessments at Jan. 1 renewals, Mr. Anderson said.

“What everyone’s working through right now is where that capacity will come from… and Ian will add a little challenge along the way,” he said.

Inflation is having a huge impact on U.S. property/casualty insurers, particularly the fact that inflation for insurance is much higher than the headline CPI index, said Kerri Hamm, executive vice president, head of business development at Munich Re U.S. during the panel discussion.

Inflation obviously impacted the property/casualty market and was an important consideration prior to last week’s events, said Will Garland, president, centers of excellence, Guy Carpenter & Co. LLC.

“It'll be further magnified going forward,” and Hurricane Ian “won’t help,” Mr. Garland said.

Prior to last week, inflation was a key challenge that the industry was addressing, Mr. Anderson said.

Hurricane Ian has magnified that focus and will do in the coming weeks and months, he said. “There’s a lot of attention now on what that looks like from a loss perspective, and the loss numbers out there in anticipation of renewals,” Mr. Anderson said.

Various catastrophe modelers have published a range of loss estimates on Hurricane Ian, with Boston-based Karen Clark & Co. putting the likely insured loss at close to $63 billion.

That figure included estimated demand surge and estimated impacts of the excess litigation in Florida.