Following rate improvements in many markets, and particularly in loss-affected segments, further rate hardening across all lines of business is expected, according to reinsurance firm Swiss Re.
Sharing its view on the upcoming renewals season, Swiss Re said in a statement it also expects more opportunities for re/insurers due to a combination of “improving insurance demand and growing exposures”.
It predicts prices to continue to increase driven by the combination of lower interest rates and the need for prices to cover increasing loss trends as demonstrated by recent experience across the world.
The firm said in particular hurricanes are “frequently affecting areas where exposures have grown as a result of wealth accumulation” leading to “increasingly severe losses”.
“The current Atlantic hurricane season is the first on record to see nine tropical storms forming before August and 13 before September. The situation is further aggravated by the higher frequency and severity of secondary perils, such as floods and wildfires, leading to rising claims and highlighting the need for insurance protection,” it said.
It also said that while low interest rates have been affecting the industry’s profitability since the global financial crisis, further rate cuts aimed at fighting the economic impact of Covid-19 “will only exacerbate this problem”.
Swiss Re Institute said it concludes that, to achieve a reasonable return on equity through 2021, non-life insurers in G7 markets “need to improve underwriting margins by as much as 7-12 percentage points to compensate for lower interest rates”.
CEO of Reinsurance Moses Ojeisekhoba said: “Even before the Covid-19 crisis, most major markets were operating at below-average profitability. To be able to address the growing need for insurance protection in a sustainable way, further price increases across all lines of business are clearly needed.“