US: Reinsurance costs expected to increase
Source: Middle East Insurance Review | Aug 2023
Reinsurance pricing will likely increase further this year despite a drop in predicted storms for the 2023 hurricane season, which began in June, according to analysts at investment bank Morgan Stanley, reported Business Insurance.
Reinsurance pricing for Florida-exposed risks rose 20% to 50% during midyear renewals, and a long-term trend toward more storms and little increase in capital in the reinsurance sector will likely drive further rate hikes.
The report noted that there is a clear trend toward higher US property reinsurance costs, which would not be offset if there were a more ‘normal’ hurricane season. Colorado State University, which issues closely watched hurricane forecasts, recently amended its outlook for the 2023 season to 18 named storms, which would be two fewer than its 2022 prediction issued in July last year. The total named storms in 2022 only numbered 14.
Citing data from the US National Centres for Environmental Information, though, the Morgan Stanley report noted a significant increase over the past three years in natural disasters causing more than $1bn in damage.
The report said, “We believe US property catastrophe reinsurance costs will continue to rise and believe that reinsurance providers will view a potentially normal 2023 hurricane season as ‘one-off’.”
It added that reinsurance capital is not expected to increase sharply in the near term. M