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Rising Property and Casualty Reinsurance Costs to Impact Customers

By January 25, 2021Millers News

The current dynamics of the reinsurance market have led to reinsurers pushing for further price increases. In AM Best’s Market Segment Report, “Market Segment Outlook: Global Reinsurance,” AM Best states that the current market hardening likely will need to continue for at least a couple of years to have a meaningful impact on the segment.  Additionally, pricing momentum will have to be sufficient to offset losses from previous years’ events.

The key players driving up costs are the strains incurred in connection with the Covid-19 pandemic, low interest rate levels affecting capital and the large natural disaster losses recorded over the past few years.

In 2020 alone, hurricane season produced a record-setting, thirty-named storms in the Atlantic Basin. From the 30 named storms, 13 developed into a hurricane. This record-setting storm activity produced economic losses of $65 Billion.  The damage inflicted by tornados, hailstorms and fire losses seen in California didn’t help matters.

And with interest rates at a historical low, insurers cannot rely on investment income to make up for the underwriting losses. This makes pricing discipline a necessity, as technical profitability will have to do even more to offset the investment income decline. Insurers are faced with relying on premium adequacy to cover losses and generate profit by increasing rate and sharpening underwriting discipline.

Put simply, during a hard market, insurance buyers may face difficult decisions regarding their insurance coverage. But business owners who proactively address risk, control losses and manage exposures will be better prepared for a hardening market than those who do not.