Reinsurance price rises making sector more resilient, improving outlook: Fitch

Analysts are of the view that the global reinsurance outlook is improving for 2022 as higher prices are making the sector more resilient to the effects of climate change on natural catastrophe claims patterns, according to  Fitch Ratings.

Several reinsurers said at the recent Monte Carlo Rendez-Vous and Baden-Baden Reinsurance Meeting that they expected further price rises when contracts are renewed in January.

Fitch believes that reinsurers’ plans to continue raising premium rates should contribute to stronger profitability and an improving sector outlook.

“This is largely due to increasing natural catastrophe claims linked to climate change,” it said.

“Prospects of a strong economic recovery and lower pandemic-related losses were also key,” it added. It warned that 2021 was likely to be one of the five costliest years on record for reinsurers.

“We expect double-digit percentage premium rate rises for property catastrophe cover in 2022 due to the excess losses in 2021 and the prospect of higher natural catastrophe claims frequency and severity in future. This would make 2022 the fifth successive year of price rises. The price increases should help to bolster the sector’s underwriting profitability as they gradually feed into reinsurers’ underwriting margins,” Fitch said.

Noting that higher prices would make the sector more resilient to the effects of climate change, it also highlights the role of insurance linked securities.

“The growth of catastrophe bonds to pass risk directly to investors could also become an important factor to mitigate the sector’s exposure to climate change risk in the coming years,” the analysis stated.

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