MONTE CARLO, Monaco – The world’s biggest reinsurers will push for significant rate hikes on Jan. 1, 2023, renewals as they say exposures are rising and inflation in key markets continues to drive up claims.
During events and meetings at the Rendez-Vous de Septembre reinsurance meeting in Monte Carlo this week, senior executives at Munich Re Ltd., Swiss Re Ltd., Hannover Re SE and SCOR SE said rates will increase at the end of the year at with demand for reinsurance expected to increase but total market capacity has decreased.
However, they declined to give specific predictions about the size of rate hikes.
Premium increases for US property catastrophe risks will be “very substantial”
; by the end of the year to reflect increased inflation and increased exposure, said Jean-Jacques Henchoz, CEO of Hannover Re.Prices will also rise globally, reflecting increased losses, he said.
“After a few years of increased activity, we need to see significant adjustments to the terms,” Henchoz said.
Rising inflation will lead to economic volatility, said Torsten Jeworrek, chairman of Munich Re’s reinsurance committee.
“The next renewal is much, much more challenging than last year’s where we had a much more financially stable environment,” he said.
Global dedicated reinsurance capital has declined from $475 billion in 2021 to about $435 billion in 2022, Jeworrek said.
Modeled loss costs, including materials, labor and other factors, have increased 20% over the past 12 months for some U.S. real estate exposures, said Marcus Winter, president and CEO of Munich Re US in Princeton, New Jersey.
“There have been price increases on the reinsurance side but not to the extent that is necessary, which is why we expect significant price corrections over the next 12 months,” he said.
Demand for U.S. reinsurance coverage is such that Munich Re saw some cedants return to the market for additional capacity after the June 1 and July 1 renewals were completed and has already agreed to a January 1, 2023 renewal contract with one of its cedants, Mr. Winter said.
Increased concentration of people in disaster-prone areas, increased insurance penetration and increased wealth are the main drivers of higher reinsurance claims, says Thierry Léger, Group CEO of Insurance Companies at Swiss Re.
The effects of climate change will also drive up claims but not to the same extent as the other drivers, he said.
“Only 20% of the increase between now and 2040 will be due to climate change,” he said.
The reinsurance market is at a similar inflection point as the insurance market saw five years ago, when significant multi-year interest rate increases began, said Laurent Rousseau, CEO of SCOR.
“I’m confident that today at this stage we’re actually seeing what we saw in insurance in 2017 in reinsurance,” Rousseau said.
Source link
