A new report by Swiss Re titled “Global insurance review 2017, and outlook 2018/19” found that non-life re/insurers full-year underwriting results are being substantially impacted by the last few hurricanes and earthquakes in Mexico.
According to the report, the last three hurricanes and earthquakes in Mexico cost the U.S. property & casualty insurance industry an estimated $95 billion dollars. That number could go up if there are any more large-scale natural disasters before the year is over.
That figure will almost certainly be higher for the global reinsurance market. Assuming there are no major changes before the end of the year, the combined ratio for the 2017 reinsurance sector will be around 115%, up from just 92% in 2016.
This will have a measurable effect not just on insurance industry employees, but clients as well. As a result of these changes, rate hardening is expected in both non-life insurance and reinsurance around the world.
It isn’t all bad news however. According to the same report, Swiss Re hypothesizes that the global economy is in a cyclical upswing. If that’s true, we can expect for moderate growth in this space over the next two years. This was addressed in a passage of the report that reads: “This should further support growth in the insurance markets, with global non-life premiums forecast to rise by at least 3 percent and life premiums by about 4 percent in real terms annually in 2018 and 2019,”.
Now, of course, there is no guarantee that things will get better over the next few years. Swiss Re spoke with the Insurance Journal, explaining how “A number of risks could derail this relatively benign growth outlook. For example, protectionist trends pose an increasing threat to global economic growth. Also, there are worries that unwinding of quantitative easing programs by central banks could spark a negative financial market reaction. In addition, elevated corporate debt levels in China, despite measures taken, remain a concern.”
It’s impossible to predict what the future will hold, but for now it’s a safe bet to assume that rate hardening is on its way for non-life insurance and reinsurance policies across the industry. Hopefully there are no more major disasters that exacerbate the problem before the year is up.