Fitch expects P&C rates to increase from HIM losses, other lines less certain

Hurricanes Harvey, Irma and Maria (HIM), along with earthquakes in Mexico and California wildfires could result in 2017 being a record year for insured cat losses, according to Fitch Ratings' 'European Reinsurance Dashboard - 3Q17 Results'.

As a result, Fitch expects reinsurance rates for property/casualty to increase, particularly on US catastrophe exposed lines, as a result of these significant events.

There is less certainty over more widespread rate rises outside of these lines, however, given the excess capital and potential for new capital to enter the market.

Among the large European reinsurers, Munich Re and Swiss Re were more heavily affected by cat losses than Hannover Re and SCOR.

Losses from HIM and the Mexico earthquakes represented 12 percent of Munich Re’s first half of 2017 equity, compared to 8 percent of Hannover Re’s. All four reported significant deterioration in combined ratios but, on a normalised basis, combined ratios remained around 100 percent.

Another factor that could influence the extent of rate increases if the extent to which more capital will be raised from the ILS markets, according to Fitch.

The degree that rates rise will also depend on the amount of capital that remains 'trapped' by protracted litigation, particular in relation to hurricane Harvey flooding losses.

In spite of these losses, Fitch noted that the major European reinsurers remain very well capitalised, and their regulator solvency ratios remain within their target ranges.

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