The estimated $136 billion in catastrophe loss estimates for 2017 is one for the record books. But resulting, widespread reinsurance price hikes in 2018 aren’t likely, Willis Re said in a new report.
“Unfortunately for reinsurers, these losses are coinciding when profitability in non-catastrophe lines is constrained and prior-year reserve releases are slowing,” the report noted. “Historically, such a combination of factors would have led to a widespread upward spike in pricing as witnessed in 2001 and to a lesser extent in 2005 and 2011.”
A number of other corresponding factors mean that a widespread price hike won’t happen, according to the Jan. 1, 2018 report: “Willis Re 1st View: Extreme Weather – Calm Market.”
Willis Re said that pricing corrections have been quite orderly rather than widespread, helped, in part, by the division of those catastrophe losses over a number of different events. Another positive factor: many of the losses took place in the primary market. Also, capital supply continues to be ample, and that has helped limit widespread increases in risk-adjusted rates on loss-free portfolios, the report states. Still, as Willis Re noted, these losses stopped a continued downward movement in risk-adjusted rates in most markets and classes.
Major findings from the report:
Source: Willis Re/Willis Towers Watson