All material subject to strictly enforced copyright laws. © 2021 Insurance Insider is part of Euromoney Institutional Investor PLC.
Accessibility | Terms & Conditions | Privacy Policy | Modern Slavery Act | Cookies | Subscription Terms & Conditions

Big 1.1 rate increases limited to loss-hit lines: JLT Re

JLT Re has bolstered an emerging consensus around the outcome of the 1 January renewals, with the broker's risk-adjusted property catastrophe reinsurance rate index rising by 4.8 percent.

The firm said today that loss-affected US property cat business had seen rate increases of between 10 and 20 percent at 1 January.

US accounts that avoided losses were able to renew between flat and 5 percent up on a year ago.

Ed Hochberg, CEO of JLT Re in North America, echoed the view that cedants had succeeded in limiting rate escalation, adding: "Although reinsurers sought to stem margin compression with more substantial rate rises at 1 January 2018, many conceded ground to clients as the date neared, particularly in non-loss affected areas."

Hochberg noted that international property cat renewals had priced flat or with moderate rate increases, after a benign year for catastrophes in Europe and Asia.

"Even with these increases, the cost of property protection remains competitive with global property catastrophe pricing approximately 30 percent below 2013 levels," he said.

JLT said that global retrocession and direct and facultative (D&F) business saw higher rate rises at 1 January, but even these failed to match early market expectations of more significant price increases.

Bradley Maltese, deputy CEO for UK and Europe at the broker, said retro cat programmes had seen rate increases of between 10 and 20 percent on a risk-adjusted basis.

Lloyd's and global D&F covers - accounts that fared badly amid last year's hurricanes - secured risk-adjusted rate rises of between 15 and 25 percent. The worst-affected D&F accounts obtained rate rises above 25 percent.

JLT Re said specialty reinsurance covers had renewed flat or with modest rate increases, reflecting a view that pricing in some lines had reached levels that "tested technical profitability", although the broker did not specify which areas of coverage it was referring to.

Casualty rates were also pushed upwards, as reinsurers demanded increases to pay for a build-up of claims. Loss-free casualty cedants escaped with flat renewals, while loss-struck casualty accounts attracted moderate rate increases.

Reinsurance capital remains plentiful, JLT Re said, with the insurance-linked securities market able to replenish a "significant proportion" of lost capital with fresh investment.

David Flandro, JLT Re's global head of analytics, said that 2017 was the first year since 2008 that the global level of reinsurance capital fell.

"While supply and demand dynamics initially tightened in business lines with heavy losses, pressures were offset by post-HIM capital deployments through channels such as new collateralised vehicles, post-event funds, new catastrophe bond issuances and increased stamp capacity and pre-emptions," Flandro said.

He added that there was still uncertainty over the final level of 2017 aggregate losses, a situation exacerbated by the December wildfires in California.

"Any significant changes to loss expectations in the coming months could potentially affect pricing," he said.

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree