Cat-hit accounts see up to 50% reinsurance rate hikes: Gallagher Re
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Commercial property reinsurance rates rose 30% to 50% across the U.S. for accounts with catastrophe losses at June 1 and July 1 reinsurance renewals, according to a report Monday from Gallagher Re, the reinsurance brokerage of Arthur J. Gallagher & Co.
Catastrophe-exposed property rate movements were similar in the U.K. at 32.5% to 37.5% while in Australia the increases were more dramatic at 40% to 75%, according to report data.
Despite the double-digit increases, the sticker shock of January 1 reinsurance renewals was gone, replaced by managed expectations.
“Prices have moved up, but it’s been less of a shock,” said London-based James Vickers, chairman international, reinsurance, at Gallagher Re. He said the June 1 and July 1 renewals were “much calmer and smoother” as a result of expectations forged at January 1. “People saw what happened at January 1 and thought ‘Well, this is probably going to happen to us.’”
Mr. Vickers added that there were some more difficult renewals in smaller markets such as Latin America and the Caribbean as pricing there caught up with larger markets.
Rising attachment points for the lowest levels in reinsurance towers left primary insurers retaining more risk as reinsurers sought to insulate themselves from the rising frequency and severity of property claims hitting those layers, mainly due to so-called secondary perils including wildfire and severe convective storms, Mr. Vickers said.
Robust insurance-linked securities activity also helped smooth the renewal process, with the $7.8 billion of non-life catastrophe bond capacity issued year to date in 2023 already equal to that issued in the whole of 2022. “They’re very useful additional capacity,” Mr. Vickers said of the cat bonds, many of which are being sponsored by primary insurers. “They are using that to help them buy the limit they are looking for.”
