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Ratings agencies see falling reinsurance rates despite hurricanes


Comments / {{hitsCtrl.values.hits}} Views / Monday, 11 September 2017 00:00


LONDON (Reuters): Global reinsurance rates are likely to fall by up to 7.5% at Jan 2018 renewals due to strong competition, despite the impact of Hurricane Harvey, ratings agencies said.

A military helicopter flies over a destroyed house in Rockport

Reinsurers, who help insurers shoulder the burden of large losses in return for part of the premium, meet next week at their annual conference in Monte Carlo to hammer out next year’s deals with insurers.

Reinsurance rates have been falling for several years due to competition in the sector, including new entrants, and also due to declining demand following low levels of natural catastrophes in the developed world.Hurricane Harvey, which may have caused $10-20 billion of insurance losses according to estimates, is not large enough to reverse the declining trend, analysts from S&P Global and Fitch said.

“You’d need to see a bigger cat (catastrophe) event to really have some impact on price,” Dennis Sugrue, senior director at S&P Global, told a briefing.

Sugrue expected rates to fall by up to 5% at Jan 2018 renewals.

Moody’s also said this week that Harvey was unlikely to affect global property reinsurance rates.

Graham Coutts, EMEA head of reinsurance at Fitch, told a separate briefing that rates might fall by up to 7.5%, following similar declines at July renewals.

However, further US hurricanes could lessen those declines, he said.

Hurricane Irma, a powerful Category 4 storm, headed toward the Caribbean and the southern United States on Tuesday as islands in its path braced for possible life-threatening winds, storm surges and flooding.

“It very much depends on what happens in the rest of the hurricane season,” Coutts said, adding that if Irma were to hit Florida, “you might see a flatter renewal”.

Insurance specialists expect rates to rise in areas directly affected by Harvey, however, due to increased demand for flood insurance.

“It will lead to some further localised (price) tightening in and around coastal areas and probably more specifically Houston,” Duncan Ellis, US property practice leader at broker Marsh, said. 

 


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