Global disaster rates have increased 27% year to date, with the United States experiencing the highest increase at 35%, according to RBC Capital Markets.
Property catastrophe rate indices have reached levels not seen since 2006, when a significant number of new insurers emerged, including well-known companies such as Lancashire.
In various sub-segments, insurance rates continue to rise in 2023, except for Specialist lines. Softening Directors and Officers (D&O) and cyber rates, which are already at healthy levels, are driving this trend.
However, the re-acceleration of commercial rates is expected to stabilize reinsurance pricing, as primary carriers may pass on higher reinsurance costs.
The specialty re/insurance sector continues to face a very difficult market environment, according to RBC Capital Markets.
The depressed level of capital remains a challenge for the industry due to unrealized asset losses after the increase in interest rates in 2022. This will somewhat limit the supply of capital at a time when demand is increasing due to inflation and rising risk avoidance.
Despite strong issuance of alternative capital year-to-date, almost surpassing the total for the entire year of 2022, the growth of alternative capital was not sufficient enough to disrupt the pricing environment.
RBC Capital Markets believes that although there has been a significant change in changes this year, it should not be considered a permanent change. Instead, it is attributed to a coordinated effort across the industry to guarantee profits and implement responsible capital management.
This method aims to show tangible results and separate from the perspective of making promises for the future without giving. It can be seen as a “show-me” narrative that seeks to destroy the sector’s reputation for constantly delaying positive results.