richard-hewitt-
Richard Hewitt, head of Business Intelligence, EMEA, Guy Carpenter
10 September 2018 Insurance

Rate hikes lower during 2018

The stated desire of many reinsurers last year was for across-the-board rate increases, but this did not materialise at the January 1 renewals, with increases predominantly concentrated in loss-affected lines, Richard Hewitt, head of Business Intelligence, EMEA, Guy Carpenter, told Monte Carlo Today.

Through the April to July renewals the market witnessed a moderation in the increase for these loss-affected lines and it is likely that this trend will continue for the remainder of 2018, subject to there being no major losses in the interim period, Hewitt said.

He added that while the average increase in Guy Carpenter’s US Property Catastrophe Reinsurance ROL Index for the January 2018 renewals was around 8 percent, the level of increase has been falling since, so that following the June and July renewals the average year-to-date increase in the Index was around 6.5 percent. “In other words, we have seen a slowing in the increases,” he said.

“There was a lot of posturing last year but the lights were nowhere near being knocked out. Rates increased for programmes impacted by losses, but outside of that changes were pretty moderate,” he added, stressing that given the high levels of capacity that remain in the market, this actually represents a fairly rational reaction.

According to research by Guy Carpenter and AM Best, capital in the sector increased by 4 percent through to mid-year 2018, including an increase in alternative capital of 10 percent. Subject to no major events in the coming months, they would expect this to trend up to 7 percent by year-end.

“Yes, reinsurers will be stating their case for price adequacy during negotiations, but the availability of capacity means that these expectations will be dampened.

“We have actually seen more alternative capacity enter the market in 2018. Unless there are further heavy losses in the near future, we can’t see any significant rate changes taking place,” Hewitt concluded.

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