Rates will harden in 2018 renewals—but by how much and for how long?

29-12-2017

Rates will harden in the 1/1/2018 renewals—or at least that is what 86 percent of respondents to an end of year survey conducted by Bermuda:Re+ILS think.

The hefty hurricane losses in 2017 combined with a number of smaller events such as the earthquakes in Mexico and wildfires in California have triggered an adjustment in the market, with most analysts predicting rate increases.

But the extent to which this will become a reality may not be known for some time, and big differences could emerge between rate changes on loss-hit property-cat lines and other lines of business.

Greg Hendrick, president of property & casualty insurance and reinsurance at XL Catlin, said rates will harden. “With rates at a low point before the events and increased return demands from capital providers prices have only one way to go: up,” he said.

Don Kramer, chief executive of ILS Capital, agreed. “Rates will harden following the losses of 2017. Casualty rates had been softening for quite a long time,” he said.

Greg Wojciechowski, chief executive of the Bermuda Stock Exchange, also agreed but noted that only time will truly tell.

“After a series of significant industry loss events and a long soft market, we believe the industry expects rates to harden for certain segments of the ILS space which may be influenced by loss estimates and potential changes to modelled assumptions. Time will tell,” he said.

Not all agree. A number of respondents (14 percent) said they think rates will soften further. One broker explained why: “They will soften. There remains too much capital in spite of deteriorating results.”

Brad Kading, the outgoing chief executive of the Association of Bermuda Insurers and Reinsurers (ABIR), said there will be other factors at work when it comes to rates. He cited that US regulatory issues, especially the NAIC implementation regime for the EU/US covered agreement which provides the same collateral reduction benefits to Bermuda, Swiss and Japanese reinsurers as are provided to EU reinsurers, could have an important influence on how business is conducted in 2018.

January 2018 renewals, Rates, Insurance, Reinsurance, Survey, XL Catlin, ILS Capital, ABIR, Bermuda

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