Reinsurance costs rise up to 200% as Ukraine war and extreme weather bite
The war in Ukraine and extreme weather events have driven up the cost of reinsurance by as much as 200 per cent in crucial January renewals, according to a new report, threatening to raise premiums and reduce what insurers are willing to cover.
January 1 is the key policy renewal date for reinsurers, which share losses with primary insurers and so have a vital role in what can be insured and at what price. This year’s renegotiation of reinsurance policies has been the most challenging in years as reinsurers respond to pressure from spiralling inflation and large losses from natural catastrophes, as well as the fallout from Russia’s invasion of Ukraine.
James Kent, global chief executive at reinsurance broker Gallagher Re, which published the report on Tuesday, described it as a “very late, complex and in many cases frustrating renewal”.
The cost of aerospace reinsurance rose by between 150 per cent and 200 per cent, as reinsurers adjusted pricing in the light of a revaluation of past losses, as well as expected payouts from stranded planes and a legal battle with leasing companies in the wake of Russia’s invasion of Ukraine.
Property catastrophe reinsurance, which shoulders losses from hurricanes and other natural disasters, also jumped, with rates in the US increasing by between 45 per cent and 100 per cent for loss-hit policies, according to Gallagher Re’s figures. The broker put this down to the impact of Hurricane Ian, which struck Florida and South Carolina last year, as well as the threat from inflation, which drives up payouts.
“For property, this is the year that reinsurance has got back in the driving seat and they’ve been very firm,” Gallagher Re’s international chair James Vickers told the Financial Times. “They haven’t cracked.” He described the reinsurance negotiations as the “toughest [market] since 9/11”.
In a report also published on Tuesday, broker Howden said the cost of property catastrophe reinsurance had increased by 37 per cent globally in the January renewals, the largest rise in comparable data running back to 1992. Howden called it “one of the hardest reinsurance markets in living memory”, using an industry term for a period of sustained price rises.
Higher reinsurance prices and the reduced availability of some cover typically feed through to the prices that insurers charge and what they are willing to offer, although they can also choose to write business “net”, or without reinsurance cover. The reinsurance price rises are expected to further fuel what is already a years-long upswing in insurance prices for companies.
An update on the January 1 negotiations last week from Guy Carpenter, another of the big reinsurance brokers, described it as “one of the most challenging reinsurance markets the sector has experienced”, with some reinsurers’ initial requests to modify coverage “threatening to erode the core value of the reinsurance product”.Property was the hardest renegotiation in what was a “stressed” sector, it said, with substantial price rises and worse terms. Another factor in rising reinsurance prices has been a capacity squeeze, as reinsurers pull out of areas such as property catastrophe reinsurance. But the brokers reported that the degree of price rises in the January 1 renewals had lured some new capacity into the market, for instance by underwriters raising fresh capital.
https://www.ft.com/content/f5f9d450-c539-47a7-bc5c-44a8db57e74e
________________________________________________________
Ash here.
Reinsurance is key way insurers manage risk. QBE is a Re as well as an insurer, diversifying and reducing hazard.
I cannot assess whether the Re price boom advantages or disadvantages QBE, though it will be better placed than its Australian competitors.
This report suggests further premium rises will be necessary.
Ash
Reinsurance costs rise up to 200% as Ukraine war and extreme...
Add QBE (ASX) to my watchlist
 (20min delay)
|
|||||
|
Last
$18.08 |
Change
0.070(0.39%) |
Mkt cap ! $27.16B | |||
| Open | High | Low | Value | Volume |
| $18.04 | $18.20 | $18.00 | $63.80M | 3.526M |
Buyers (Bids)
| No. | Vol. | Price($) |
|---|---|---|
| 1 | 8327 | $18.08 |
Sellers (Offers)
| Price($) | Vol. | No. |
|---|---|---|
| $18.12 | 489 | 1 |
View Market Depth
| Last trade - 16.10pm 05/06/2024 (20 minute delay) ? |
|
|||||
|
Last
$18.09 |
Change
0.070 ( 0.62 %) |
||||
| Open | High | Low | Volume | ||
| $18.02 | $18.20 | $18.01 | 468237 | ||
| Last updated 15.59pm 05/06/2024 ? | |||||
| QBE (ASX) Chart |