Climate Change Driving Higher Property Catastrophe Reinsurance Rates
October 29, 2021
Property catastrophe reinsurance prices will likely see double-digit increases at January renewals due to excess losses in 2021 and the likelihood of higher natural catastrophe claims frequency severity in the future, according to Fitch Ratings.
That would make 2022 the fifth consecutive year of property catastrophe reinsurance price increases, Fitch said, adding that the increases should bolster the reinsurance sector's underwriting profitability as they feed into reinsurers' underwriting margins.
Fitch noted that natural catastrophe claims have become more frequent and more severe in recent years due to climate change. The rating agency said it expects 2021 to become one of the five most costly years this century for global reinsurers. Severe floods in Central Europe and Hurricane Ida in the United States in late August and early September will together result in insured losses of more than $40 billion, Fitch said.
Globally, there were approximately $40 billion in insured losses during the first half of 2021, and the global total for the year will also include several smaller catastrophe events during the year's second half, including a series of wildfires, and will exceed the amount reinsurers had budgeted for, according to Fitch.
"Higher prices are making the sector more resilient to the effects of climate change on natural catastrophe claims patterns," a Fitch statement said. "Reinsurers have shown discipline in prioritizing pricing for increased risk rather than seeking to undercut competitors to gain market share. The growth of catastrophe bonds to pass risk directly to investors could also become an important factor to mitigate the sector's exposure to climate change risk in the coming years."
October 29, 2021