Climate change an increasing issue in reinsurance pricing: Amwins
Ongoing climate change is set to factor into pricing thinking for property reinsurers, inhibiting pricing reductions in the near term.
That is the message from Jessica Zuiker, assistant national property practice leader with Amwins Group, alongside Rich DiClemente, president of Amwins Re. The pair pointed to last year’s losses due to natural disasters.
They said: “With losses totaling $145bn, 2021 was the third costliest year for weather and climate disasters. The U.S. saw 20 separate events with economic losses of at least $1 billion each, according to NOAA. Climate change will cause larger and more frequent loss events and will increasingly factor into property reinsurers pricing, inhibiting any reduction in pricing for the near term. CAT budgets are under review for many reinsurers—particularly for the Gulf Coast, Florida and severe convective storm-affected locations.”
They added: “Facultative demand has increased year over year since 2019 and it’s clear that this capacity is critical in completing most layered placements. Like insurers, however, re- insurers prefer to move out of layers that are more heavily loss-affected, and many will not look at layers affected by attritional losses. As a result, reinsurers have vacated primary and low layer business and are moving into higher attachment points whenever possible on new or renewal business.”
Next year, said Zuiker and DiClemente, should see the sharpening of underwriting pens after combined loss ratios towards the end of 2021 reaching around 100% after heavy losses in the facultative markets.
These losses, said Amwins, were both attritional and shock.
They added: “Property reinsurers routinely reject flat pricing on renewals and on loss-affected business, reinsurers will be pushing rates even further. Reinsurer retro costs increased by 10% to 15% which will be reflected in higher pricing, especially on CAT-exposed business.”