Home Finance Reinsurance rate momentum to continue, albeit at a slower pace: Moody’s

Reinsurance rate momentum to continue, albeit at a slower pace: Moody’s


with him 2021 Atlantic hurricane season Now upon us and forecast for another above average level of activity this year, Moody’s Investors Service highlights the challenges that may present for the reinsurance sector, but remains positive on higher price momentum, whether it is losses. to have an impressive year or not.

Moody’s noted that the last five hurricane seasons (2016-2020) have all seen fairly high activity levels when it comes to Atlantic hurricanes.

Each of these years has had at least 15 named storms, while 2020 was said to be hyperactive with a record-breaking 30 named storms.

In addition, reinsurance firms will be watching the tropics closely for any signs of a repeat of the year, like in 2017, when some of the most powerful and costly hurricanes on record formed.

Moody’s noted that Hurricanes Irma and Maria played a major role in making 2017 the largest insured disaster loss year on record at over $148 billion (according to Swiss Re’s Sigma and inflated for 2020).

On top of the challenges of potential hurricane impacts through 2020, Moody’s highlights massive inflationary price pressures on materials and labor in particular, as a threat to the reinsurance and insurance-linked securities (ILS) market. Need to see in 2021.

Moody’s explained, “Given the significant price increases for lumber and other construction materials in recent months, damage and loss adjustment expenses from hurricane events were particularly impacted by increased costs related to demand growth for building materials and labor.” Will be.”

This could have implications for any hurricane event and, in the event of any storms approaching in 2021, we could see industry damage looking even higher than similar storms in recent years.

As hurricane season begins, reinsurance pricing is always a high-profile topic, especially Renovations just completed June 1 for Florida, with a rate hike that fell short of many expected.

notwithstanding and Some evidence of softening in ILS-specific products such as disaster bonds and industry loss warrants (ILWs)Moody’s Investors Service said it expects continued positive momentum in reinsurance pricing.

In fact, the rating agency believes that positive reinsurance price movements will be seen in January 2022, although noting that “the rate of positive change appears to be decreasing somewhat as both traditional reinsurers and alternative capital providers” The supply of reinsurance capacity is increasing from the demand.

James Eck, Moody’s vice president, said: “The high levels of catastrophe in recent years, continued low interest rates and the threat of social inflation over loss reserve adequacy all support higher reinsurance pricing in the US during mid-year renewals this year. “

“We think this strength in reinsurance pricing is likely to continue into the January 2022 renewal.”

fresh loss from 2021 Atlantic hurricane seasonThis, especially one where loss inflation factors become an issue, should only serve to help maintain momentum in reinsurance pricing.

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