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Explore the latest trends and actionable insights on the Global Reinsurance market to inform business strategy and pinpoint opportunities and risks

Increasing Reinsurance Rates Pose Serious Threat to Insurers

Industry: Reinsurance
Current: Market Sizing & Shares

To deal with increasing costs, primarily brought on by inflation, insurers already increased the premium rates for their commercial, homeowner, and vehicle insurance
Reinsurers are responding to five years of unusually high disaster losses and mounting concerns that, among other things, climate change is increasing the risks associated with storms and wildfires
Negotiations between insurers and reinsurers are taking place since reinsurers are planning to raise prices by 10% to 30%

Concerns For Insurers to Stay

Although the hurricane season has almost come to an end, one more storm is likely to strike Florida. The concerns of insurers would not subside on November 30, 2022. Negotiations between insurers and reinsurers are taking place since reinsurers are planning to raise prices by 10% to 30%. Every January 1, about two-thirds of the country's property catastrophe insurance coverage is renewed, including by a large number of diversified insurers in the US and Europe. The gross written premiums in the US increased significantly in 2022 over that in the previous years, according to GlobalData.

It is too early to tell if the reinsurers will achieve their objective. Carriers could take on more risk to minimize the increase in costs, acquire less reinsurance, and restrict the increase in premiums they would otherwise pass on to clients. To deal with increasing costs, primarily brought on by inflation, insurers already increased the premiums for their commercial, homeowner, and vehicle insurance.

Reinsurers are responding to five years of unusually high disaster losses and mounting concerns that, among other things, climate change is escalating the risks associated with storms and wildfires. The projected cost to insurers of Hurricane Ian, which claimed more than 130 lives, ranges from $40 billion to more than $70 billion, making it the second-most expensive natural disaster in terms of the financial impact on the insurance sector in the country. In today's currency, Hurricane Katrina cost more than $90 billion.

Reinsurers are also suffering from a substantial increase in interest rates. The value of the bonds they own declines when rates increase. The companies would need to sell some of their bonds at a loss if they must pay out, for instance, because of a string of large hurricanes. The increase in reinsurance prices is due to the effect of inflation on carriers.

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