Reinsurance rates may increase into 2022, but momentum to wane: Fitch

Reinsurance rates may increase into 2022, but momentum to wane: Fitch

Reinsurance rates and pricing are anticipated to increase again at the upcoming mid-year 2021 June and July renewals, likely increasing even more into 2022 also, but by next year these rises may be losing momentum, Fitch Ratings believes.After three consecutive years of rate solidifying at the January and April reinsurance renewals, Fitch says the mid-year 2021 renewal season will follow-suit.
One driver for this has actually been the absence of revenues seen in reinsurance in 2020, as disaster and coronavirus losses together wore down efficiency throughout much of the market.
However, for 2021, Fitch is forecasting a “slight underwriting earnings” for the worldwide reinsurance sector, with a crucial driver being the truth that, after the consecutive years of cost firming, “reinsurance rate rises across almost all company lines outmatch loss expense inflation.”
Returns on equity (ROE) for 2021, in a normal catastrophe year and with no unexpected or particular pandemic related shocks, will only just reach the levels of reinsurer cost-of-capital, due to operations remaining stressed and financial investment returns low.
With cost increases to continue at the June and July 2021 reinsurance renewals, Fitch Ratings likewise looks ahead to 2022.
The rating firm thinks that reinsurance rates could continue to increase in 2022, but that the momentum seen will be beginning to subside already, absent any other major shocks to the reinsurance market.
Additional losses suffered in 2021, such as the US winter season storms, Australian flooding and Suez Canal clog, are all anticipated to keep the pressure up on reinsurers and ensure the focus stays on rates.
Fitchs outlook for the international reinsurance sector stays steady, showing the rate environment and the stabilisation of pandemic associated claims and expects most companies will have their scores verified over the next year or more.

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