(Reuters) — Reinsurers are likely to raise premium rates in the coming months, given pressure from inflation, the war in Ukraine, climate change and capital market volatility, ratings agency analysts said on Tuesday.
Reinsurers such as Swiss Re, Munich Re and the Lloyd’s of London market help insurers share the risk of catastrophes in exchange for a portion of the premium.
They have raised interest rates in recent years to recoup losses from natural disasters such as hurricanes and wildfires, the Covid-19 pandemic, and from sanctions against Russia and countermeasures over the war in Ukraine.
“We expect rate hikes to continue,” Ali Karakuyu, S&P Global̵
7;s principal insurance analyst, told a news conference.“Depending on what segments you’re looking at, the rate increases will vary, but on average I’d say mid-single digits (percent).”
A survey of reinsurance buyers published by credit rating agency Moody’s on Tuesday found that most respondents expect reinsurance rates to rise next year.
Property prices in the U.S. and Caribbean markets — prone to natural disasters — were expected to rise particularly sharply, in the “high-single to low-double-digit” percent range, the survey found.
But pressure on reinsurance premiums in the energy sector may ease as reinsurers have pulled back from underwriting Russian companies because of sanctions, Helena Kingsley-Tomkins, senior analyst at Moody’s, told Reuters by phone.
“Demand from Russian companies is disappearing from the market,” she said.
Reinsurers are meeting in Monte Carlo next week for their annual conference for the first time since 2019, after the event was halted during the covid-19 pandemic. They will discuss rates with their policy customers ahead of the reinsurance renewal season on January 1.
Reinsurers’ capital fell 11% in the first half to $647 billion, hurt by financial market downturns, broker Gallagher Re said in a report on Tuesday.
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