Fitch forecasts double-digit premium rate rises

Increasing premium rates should contribute to improved profitability and a better outlook for reinsurers, according to Fitch Ratings.

Reporting back from September’s Monte Carlo Rendez-Vous and this month’s Baden-Baden Reinsurance Meeting, the rating agency said several reinsurers were expecting price rises at the January renewals.

“This is largely due to increasing natural catastrophe claims linked to climate change,” said the business.

“Prospects of a strong economic recovery and lower pandemic-related losses were also key,” it added. It warned that 2021 was likely to be one of the five costliest years on record for reinsurers.

“We expect double-digit percentage premium rate rises for property catastrophe cover in 2022 due to the excess losses in 2021 and the prospect of higher natural catastrophe claims frequency and severity in future. This would make 2022 the fifth successive year of price rises. The price increases should help to bolster the sector’s underwriting profitability as they gradually feed into reinsurers’ underwriting margins,” it said.

Noting that higher prices would make the sector more resilient to the effects of climate change, it also highlights the role of insurance linked securities.

“The growth of catastrophe bonds to pass risk directly to investors could also become an important factor to mitigate the sector’s exposure to climate change risk in the coming years,” the analysis states.