Fitch Ratings has said that it expects double-digit percentage premium rate rises for property catastrophe cover in 2022 due to 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.
Fitch has previously also cited rising prices as a key reason for its view that the sector outlook was improving for 2022. Prospects of a strong economic recovery and lower pandemic-related losses were also key.
In a report last month, Fitch noted that several reinsurers had said at September’s Monte Carlo Rendez-Vous and October's Baden-Baden Reinsurance Meeting that they expected further price rises in January renewals. This is largely due to increasing natural catastrophe claims linked to climate change.
Fitch expects 2021 to become one of the five most costly years this century for global reinsurers. Severe floods in central Europe in July and Hurricane Ida in the US in late August and early September will, together, have caused insured losses of more than $40bn. Globally, there were about $40bn insured losses in 1H2021. The global total for 2021 will also reflect several smaller catastrophe events in 2H2021, including a series of wildfires, and will exceed the amount that reinsurers had budgeted for. Reinsurers have shown discipline in prioritising pricing for increased risk rather than seeking to undercut competitors to gain market share. 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.