8 September 2019 Insurance

Rates to harden—but not for all

Nearly three-quarters of respondents to an online Intelligent Insurer renewals survey expect the market to harden in the coming renewals season, with 53 percent of respondents expecting it to harden a little and 19 percent expecting it to harden substantially.

More respondents expect the market to remain stable than to harden substantially, at 22 percent. But only 6 percent expect it to soften.

Among the respondents that offered comments to elaborate on their answers, many mentioned the impact of catastrophes.

One respondent noted that rate increases are not uniform and that the industry has more than adequate capacity. “But some sectors and lines are under stress and need pricing adjustments,” the respondent said.

Another agreed, predicting that loss-affected lines of business will harden, while others remain stable. A third cited life in particular as one business where there is no need for hardening.

On their merits
When renegotiating price, half of the respondents expect each portfolio to be examined on its own merits. Around 22 percent expect capacity and competition from reinsurers to have the biggest influence on price negotiations, while 16 percent expect 2018’s extensive catastrophe losses to be the most influential factor. Only 12 percent thought competition from alternative capacity would be the deciding factor driving price.

Several respondents predicted each factor would have a varying influence on price discussions, depending on where in the world these negotiations were taking place, and the loss experience and quality of the portfolio of the insurer in question.

One respondent suggested climate change is fundamentally changing expectations among insurers, and permeating all pricing decisions.

“Cat losses are becoming normal and insurers are looking forward and backward with the expectation of more climate/storm, wildfire, and earthquake losses, even while we don’t have a complete picture of the most recent year’s cat exposures,” the respondent said.

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