A busy reinsurance renewal season is expected, as brokers and reinsurers clash after a catastrophe-laden 2017, according to
EY.
Brokers are looking for multi-year deals at lower rates for their clients, while reinsurers are bent on raising rates after several years of declining prices and the losses brought about by major catastrophe events in 2017, particularly in the second half.
“The Reinsurance Treaty (reinsurance cover being purchased by primary insurers) renewal negotiations are likely to be robust – with brokers trying to negotiate 2-3 year deals at current rates, knowing they are attractive for their clients,” Andy Worth, specialty insurance lead at EY, said in a report. “Reinsurers are also likely to resist heavily by trying to push up rates.”
Worth noted that while the first half of the year was mostly benign, major catastrophe damages were incurred in the second half, particularly due to the extremely destructive Atlantic hurricane season. Re/insurance industry losses are expected to be around US$100 billion, with the recent wildfire outbreaks in California pushing the losses even higher.
Unlike in 2005, where the losses inflicted by Hurricane Katrina were offset by investment income, 2017 will have no such cushion due to low investment returns since the global financial crisis.
The UK’s departure from the European Union, or Brexit, is also likely to affect the re/insurance industry in 2018, said Worth.
“2018 will also be the year when we see many carriers execute their Brexit Programmes to support readiness for March 2019,” he said.
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