Reinsurance renewal and retrocession costs have increased since the Fort McMurray wildfire last year, according to analysis from MSA Research Inc.
The Fort McMurray wildfire loss was one of the biggest to ever strike the Canadian insurance industry – estimated at somewhere around US$3 billion to US$4 billion. A considerable portion of the loss fell to global reinsurance firms and only minimal amounts flowed to capital markets capacity providers.
The irregular flow of losses to the reinsurance sector has caused rate rises in reinsurance and retrocessional coverage.
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MSA Research president and CEO Joel Baker explained that in the first quarter of 2017, growth in reinsurance cessions overtook growth in premiums underwritten, resulting in a drop in net premiums in the insurance market.
“This may be a result of higher reinsurance costs in a post-Fort McMurray year,” Baker told Artemis.bm.
Baker added that the biggest decline in net written premiums was actually observed among reinsurers, reflecting the heavy loss the industry took from the catastrophic wildfire. He said this indicated “higher retro costs”.
The MSA Research team suggest reinsurance rates can increase after a major loss despite the softened state of the international market.
However, Artemis.bm reported some sources claiming price increases in the Canadian market have not been significant compared to previous years, perhaps reflecting the muting effect of ample capital and capacity."
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