Global reinsurance rates will continue to rise in 2024
Global reinsurance rates will continue to rise in 2024, albeit at a slower pace than in 2023, and prices will begin to decline in 2025, according to a Beinsure Media report.
In recent years, reinsurers have raised rates in response to the COVID-19 pandemic, war, inflation and natural disasters caused by climate change, boosting their profitability, according to Fitch analysts.
“We expect the tough market environment to continue in 2024. We expect very gradual price increases, lower than what we’ve seen. Additionally, we expect softening to begin in 2025,” noted Robert Mazzuoli, senior director of Fitch.
Property-casualty reinsurance rates will rise in the low double-digit percentage range next year, while casualty or liability reinsurance will remain flat due to increased competition in the market.
Fitch raised its global outlook for the reinsurance sector to “improve” from “neutral” due to rising prices following S&P Global’s rating upgrade.
Analysts at Goldman Sachs expect rate increases in reinsurance to continue until the end of 2023, with a slowdown on January 1, 2024, a change in renewal rates and a normalization of prices in late 2024.
Despite the normalization of reinsurance prices expected at the end of next year, analysts still expect the base margin for reinsurance companies to continue to increase thanks to adjustments to terms and conditions and cap rate changes.
Although higher reinsurance rates persisted through 2023, Goldman Sachs does not believe this has been enough to restore the multi-year solid return on capital.
Analyzing data from the Global and American Real Estate Disaster Index, analysts have explored how significant the increase in real estate is to profits.
Analysts looked at the share of premiums and losses attributed to natural catastrophe property reinsurance, then used the average historical loss ratio from 2014-2022, applying the rate increase in 2023 to the top line, and then calculated what the expected change in property reinsurance cat cat ratios would be there will be losses.
As expected, the largest impact on LR and EPS came from companies most exposed to property disaster losses.
On a consolidated basis, the impact of these pricing actions was less than initially expected, contributing to the idea that although the price increases for property catastrophe reinsurance are significant, they have only modest implications for the overall consolidated company, improving ROE ~ Only 50 bps-5 points.
Source: forinsurer.com