Global insurance rate increases have slowed despite the impact of Superstorm Sandy, according to Marsh’s latest quarterly briefing, but there may yet be impetus to reduce primary retentions.
While a slowing of insurance rate increases hardly bodes well for renewals, there may yet be a silver lining for the reinsurance sector linked to the wind event.
Speaking at a recent Bermuda Re roundtable in Hamilton, James Few, CEO of Aspen Re, said that Sandy was likely to encourage primary insurers hit by major losses to consider reinsurance more closely. As Few made clear: “one of the positives that may come out of Sandy is that the event might encourage people to question whether they have bought enough reinsurance cover. Clearly Irene and Sandy were not the biggest events that could have happened, and that could change some thinking at management level about how much limit is purchased.”
However, Marsh’s Global Insurance Market Quarterly Briefing composite of major global insurers found that the average international rate change for insurers was a positive 1.2 percent rise in the fourth quarter, versus a rate rise of 1.4 percent in the third quarter of 2012. Global insurance rates have experienced a second flattening quarter, evidently in spite of Sandy, an event that was characterised by significant retentions among major US primary carriers.
Despite rising losses associated with Sandy, it is regarded as being more of an earnings event, rather than a balance sheet event for the industry.
Dean Klisura, Marsh’s US risk practices and specialties leader said: “while Superstorm Sandy caused some insurers to suffer significant losses, we do not expect it to be a market-changing event. Insurers remain well-capitalised with most of them unlikely to reduce their capacity in 2013.”
Klisura concluded that some insurers will be pushing for rate increases, particularly on the property side following losses associated with Sandy. He indicated that flat or declining rates would likely be reserved for those with favourable loss history.
Marsh, insurance, Superstorm Sandy, Aspen Re