Commercial property reinsurance rates rose 30% to 50% in the U.S. for accounts with catastrophe losses at reinsurance renewals on June 1 and July 1, according to a report Monday from Gallagher Re, Arthur J. Gallagher & Co. reinsurance brokers.
Catastrophe property rate movements were similar in the UK at 32.5% to 37.5%, while increases in Australia were more dramatic at 40% to 75%, according to report data.
Despite the double-digit increases, the sticker shock of reinsurance renewals on January 1 was gone, replaced by managed expectations.
“Prices have moved up, but it has been less of a shock,” said London-based James Vickers, chairman international, reinsurance, at Gallagher Re. He said the June 1and July 1 renewals were “much calmer and smoother” as a result of expectations created on January 1. “People saw what happened on Jan. 1 and thought, ‘Well, this is probably going to happen to us.’
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 anchor points for the lowest levels of reinsurance towers meant primary insurers retained greater risk as reinsurers tried to insulate themselves from the increasing frequency and severity of property claims hitting those tiers, mainly due to so-called secondary perils including wildfire and severe convective storms, said Mr . Vickers.
Robust activity for insurance-related securities also helped to renew the renewal process, with the capacity of $7.8 billion of non-life catastrophe bonds issued so far in the year 2023 already equaling that issued in all of 2022. “They are very useful additional capacity,” said Mr. Vickers of the cat bonds, many of which are sponsored by primary insurance companies, “They use that to help them buy the limit they’re looking for.”