New York
08 November 2017
Reporter: Stephanie Palmer

US hurricanes set to drive up reinsurance prices


Losses resulting from hurricanes Harvey, Irma and Maria, as well as the recent earthquake in Mexico City, are likely to change the dynamic of the reinsurance industry, in a positive way.

Speaking at the 2017 Bermuda Reinsurance conference, organised by S&P Global Rating and PwC Bermuda, panelists suggested that the catastrophes could affect the roles of traditional reinsurers and alternative capital, ultimately giving reinsurers greater pricing power.

Although this would not be immediate, speakers suggested that it would be a good thing for both primary insurers and reinsurers.

Jim Fiore, president at Equator Reinsurance, a subsidiary of QBE Insurance Group, said: "I think it's clear everybody wants to see pricing go up."

He added: "Everybody will benefit, and the market's going to move in that direction."

Fiore noted that it is important for market players to try to sell products that buyers of coverage want, not just those they want to sell.

He said: "There's a price for everything, and you can sit at a table and figure out whether you want more coverage or less coverage at a particular price. We need to have that dialogue about what the right price is."

S&P added that the events won’t necessarily affect the creditworthiness of US property and casualty insurers, as the sector is well capitalised with high surplus levels.

Beyond this, however, the ratings agency said reinsurance pricing will likely increase for the affected regions and business lines. Before the events, S&P expected a rate decline of 0 to 5 percent, however it is currently forecasting a 0 to 5 percent rate increase.

Accumulated losses will affect the earnings of US property and casualty insurers. S&P was already anticipating an industry combined ratio of over 100 percent, “primarily due to competitive pricing, auto woes, and a diminishing reserve cushion in our baseline forecast”.

The ratings agency said: “We assume most property and casualty insurers' initial catastrophe budgets in the first nine months of the year have already been exhausted.”

More news
The latest news from Captive Insurance Times
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
AIG to acquire Validus
22 January 2018 | New York | Reporter: Ned Holmes
AIG has agreed to acquire all outstanding common shares of Validus, the provider of reinsurance, primary insurance and asset management services, in a deal worth $5.56 billion
South Carolina welcomes 15 new captives
19 January 2018 | Charleston | Reporter: Becky Butcher
The South Carolina Department of Insurance has licensed a total of 15 new captives in 2017
A.M. Best withdraws SARRG ratings
19 January 2018 | Oldwick | Reporter: Ned Holmes
A.M. Best has withdrawn the credit ratings of SARRG, after the company requested to no longer participate in the rating agency’s interactive rating process
Regions Insurance promotes Mike Breedlove
19 January 2018 | Alabama | Reporter: Ned Holmes
Regions Insurance has appointed Mike Breedlove as its new executive vice president of property and casualty operations
Advantage opens Vermont office
18 January 2018 | Vermont | Reporter: Ned Holmes
Advantage Insurance has opened a new office in Vermont to support its growing captive insurance services business
Tennessee captive premiums exceed $1 billion mark in 2017
18 January 2018 | Nashville | Reporter: Ned Holmes
Tennessee-domiciled captive insurance companies exceeded $1 billion in written premiums in 2017 for the first time, according to year-end figures from TDCI
JLT IM hires new senior account manager
17 January 2018 | Vermont | Reporter: Ned Holmes
JLT IM has appointed Jocelyn Lyman as a new senior account manager