The Florida-focused June 1 changes show continued increases in property catastrophe reinsurance rates, with Peel Hunt analysts highlighting that rates are now 1.5x higher than 2017 trough and 46% above the previous peak until 2006.
Citing data from broker Howden Tiger, analysts noted that June 1st reinsurance renewals saw property catastrophe reinsurance rates rise 33% on average.
It is within the 25%-40% range and includes the same trends as the January 1 changes in Europe, analysts said. The sharp rate increase was driven largely by a reduction in capacity supply against an increase in demand for risk transfer, driven in part by inflation.
In fact, “the property disaster rate in the US has increased by a compound of 21% in the last three years,” explained the analysts.
Addition: “Florida is a peak zone and it is interesting that higher tier programs have seen rate increases of over 40% affected by the introduction of new minimum rate thresholds, according to Howden Tiger. “
Analysts also highlight a shift in the underwriting mix, with increased demand for higher tier programs from capacity providers (traditional and ILS capital) while a shift from lower tiers continues. .
Mid-year renewals reports from brokers reveal that renewal negotiations began very early this year, and it appears to be a smooth market.
Analysts also note that, in terms of available capital, Howden sees some recovery in ‘dedicated’ reinsurance capital and capacity available in the right structure and at the right price.
“These attractive programs are in some areas oversubscribed. However, overall low levels of capital persist,” added Peel Hunt.
Regarding global commercial insurance rates, they continue to increase during 2Q 2023 (at c.3% vs +4% in Q1), with all the major territories in low-single digits. Commercial lines in the US increased by 4%, while in the UK they increased by 1% and Europe by 5%.
“The rate increase in Property classes in 2Q 23 was +10% (similar to 1Q), driven by strong rate increases in the US (+19%) and Europe (+8%). In the US, the property insurance rates increased, supported in part by an increase in insured amounts and the strong increase in reinsurance rates passed,” said analysts.
“We suspect that coastal properties show the most significant rate increases along with properties exposed to secondary risks (convective storms, wildfires, flooding).
“The Casualty picture continues to be more mixed,” continued analysts at Peel Hunt. “While the global casualty class was 3% overall during 2Q, the Financial and Professional lines continued to soften even from a high base (-8%).”
US casualty rates increased 3%, but US financial and professional lines decreased 10%, with new competition and reduced activity in the Financial sector, and US D&O decreased 13%.
Finally, despite looking up, cyber rates slowed, to +1% in 2Q from +11% in 1Q. In addition, analysts noted that the pace of rate hikes continued to taper from +28% in 4Q 22 due to increased competition. US cyber rates started to decline (-4% in 2Q) while rising in Europe (+3%).
