Global reinsurance rates are likely to continue rising next year after several years of increases, though the pace of increase may slow, ratings analysts said on Tuesday.
“We expect this (price) trend to continue,” Moody’s insurance credit analyst Helena Kingsley-Tomkins told a media briefing, adding that she expects rate increases in the “low to mid-single digit” percentage range in 2022.
Reinsurance rates for sectors hit hard by recent losses such as cyber and property catastrophe could face “easily double-digit” rises next year, Robert Mazzuoli, director, insurance at Fitch told a separate briefing.
Insurers and reinsurers face the risk of future natural catastrophes, with climate change making them harder to predict. Moody’s said demand for insurance and reinsurance is also rising as the global economy recovers.
But strong competition in the sector could keep a lid on rate increases, analysts said.
Claims inflation means risk-adjusted, rather than nominal, reinsurance rates could remain flat, Mazzuoli added. Supply chain bottlenecks and rises in raw material prices have pushed up the cost of repairs.
Moody’s raised its outlook on global reinsurers to stable from negative on Tuesday, citing rising premium rates amid a global economic rebound. Fitch also said the outlook for the sector was improving due to higher prices, an economic rebound and lower pandemic-related losses.
Reinsurers share the burden of large losses, such as from hurricanes, with insurers, in return for part of the premium.
Insurance losses as a result of the pandemic have amounted to around $37 billion so far, Kingsley-Tomkins said, far below initial industry projections of as much as $100 billion.
The ratings agencies usually update their outlooks ahead of an annual reinsurance event in Monte Carlo each September. The event is taking place virtually this year.
Global property and casualty (P&C) insurance premiums are set to more than double to $4.3 trillion in 2040 from $1.8 trillion in 2020 as the sector shifts from lower-risk motor insurance towards higher-risk property and liability lines, the Swiss Re Institute forecast this week.