Local: (805)-371-3680 | Toll Free: (800) 240-CHIV
Insurers are encountering rate increases and closer scrutiny from reinsurers ahead of the Jan. 1 renewal season, according to reports. That could mean even higher premium rates for customers.
Insurers are nearing the end of negotiations with reinsurers, which are reportedly trying to boost rates by 10% to 30%. In simple terms, reinsurance is insurance for insurance companies.
Inflation, rising interest rates, and shrinking capital to support underwriting were three reasons Munich Re in September cited that reinsurance rates would increase.
However, it is too soon to know if the reinsurers will get the boost they want.
Carriers have options. They could buy less reinsurance to limit the increase in cost, therefore taking on more risk themselves. That could reduce premium increases they would pass on to their customers.
According to the Wall Street Journal, insurers have already been raising premium rates on their business, homeowner, and auto policies to deal with higher costs due mainly to inflation.
In a report, London-based broker Howden Group noted that reinsurance “is experiencing a degree of market hardening not seen since 2006.”
“After years of excess capacity, loss uncertainty and the changing world order have combined to create some of the most challenging market conditions in two decades,” CEO Bradley Maltese said in a statement.
Reinsurers are reacting to five years of outsize catastrophe losses from across the globe, including growing worries about climate risks. While 2022 had been a mild year for U.S. insurers before Hurricane Ian, reinsurers had a more challenging year with fierce winter storms in Europe and significant flooding in Australia and South Africa.
Hurricane Ian, which killed nearly 150 people when it made landfall in late September, is estimated to cost insurers between $40 billion and $70 billion. Ian will likely be the nation’s second most-expensive natural disaster for the insurance industry. Hurricane Katrina is the most-expensive disaster costing more than $90 billion in today’s dollars.
Read more in the Wall Street Journal (subscription may be required).
