Reinsurance Price Hikes Likely To See Reductions at January Renewals

Reinsurance rate increases are likely to continue at January 2022 renewals, though at reduced levels, according to a recent report from Fitch Ratings.

Global reinsurer underwriting performance is set to improve in 2022 as premium increases take hold, Fitch said, with further rate increases supported by high catastrophe losses, low interest rates, and inflation concerns. Still, concerns remain about deteriorating loss-cost trends, social inflation and litigation costs, and the pace of the global economic recovery on future underwriting results.

Non-life reinsurance premiums written increased 18.5 percent during the first half of 2021, as prices continued to increase and demand remained strong, the rating agency said. While reinsurance renewal rates continued to increase this year, pricing momentum slowed after 2 years of increases due to abundant capacity.

Fitch said that reinsurance renewals have not accounted for pandemic-related losses thus far, though that could change in 2022 as clarity increases around ultimate losses. Communicable disease exclusions remain commonplace in property treaties, according to Fitch.

Rate increases at January 2022 renewals should be at high single-digit, low double-digit levels, the rating agency said, as reinsurers approach rate adequacy. European property rates could experience particular increases due to recent increased catastrophe losses in the region.

"Current pricing is still inadequate in the face of rising catastrophes," Fitch said. Global insured and reinsured natural catastrophe losses were a manageable $40 billion during the first half of 2021, the rating agency said, up from $35 billion during the first half of 2020 and higher than the $33 billion first-half average from 2011 to 2020.

"July flooding in Europe could add $8 billion to 2H21 catastrophe losses, with potential additional losses from the active Atlantic hurricane season," Fitch said.