Global reinsurers are expected to raise property catastrophe rates “by well over 10%” in exposed areas during January 2023 renewals, a Fitch Ratings report stated.
“We expect double-digit percentage premium rate rises for property catastrophe cover in 2023 driven by insured losses of about US$120 billion in 2022 and the increasing frequency and severity of natural catastrophe claims,” the report said. “Price rises will be most pronounced in the regions worst affected by natural catastrophe events in 2022, including Australia, Florida and France.
“Hurricane Ian is likely to have caused between US$35 billion and US$55 billion of insured claims, making it one of the costliest natural catastrophe events ever.”
For perspective, Hurricane Katrina generated the largest single loss in the history of insurance, according to the Insurance Information Institute in New York, accounting for more than US$41.1 billion in insured damage based on more than 1.7 million claims across six states.
The destruction of the World Trade Centre towers in New York by hijacked airliner attacks cost the P&C industry about US$32 billion (in 2001 dollars), ending a soft insurance market cycle at that time. When 9-11 happened, more capacity entered the P&C insurance market, but after Hurricane Ian, Fitch observed, the amount of capacity entering the market may be offset.
“Fitch expects reinsurance capacity for property catastrophes risks to be pressured in 2023, with selective capital inflows from existing or new risk carriers more than offset by partial or total withdrawals by other reinsurance providers,” Fitch observed. “Furthermore, limited retrocession capacity will put additional upward pressure on property cat premium rates.
“Fitch also expects tighter terms and conditions in 2023, including a movement to named perils coverage from all perils, higher insurer retentions and reduced limits provided. Nevertheless, we believe demand for property catastrophe reinsurance during the 2023 renewals season will be broadly met, except for Florida.”
In Canada, two major natural catastrophes — a derecho wind event in Ontario and Quebec, and Hurricane Fiona in Atlantic Canada — have combined for more than $1.4 billion of damage in 2022, notwithstanding other NatCats that pushed this year’s catastrophe claims past $2 billion. Canadian Underwriter has made inquiries about the impact on reinsurance rates in Canada, but reinsurers are still waiting for claims numbers to shake out before they can comment.
As for specialty insurance lines, reinsurance rates are expected represent a mixed bag, Fitch’s report indicated.
“We expect significant premium rate increases for specialty lines of business, such as marine and aviation, that have been most affected by the war in Ukraine,” Fitch’s report stated. “Motor hull premium rates will also increase in response to high spare-parts price inflation but increases for liability lines should be more muted as more reinsurance capacity will be directed to this part of the market.
“Claims inflation has yet to be pushed up by social inflation or general inflation, but we expect this to change in 2023, with negative implications for underwriting margins and reserves.”
Feature photo courtesy of iStock.com/FrankRamspott