While the aftermath of Hurricane Harvey has been putting a lot of pressure on regional insurers in Texas as claims continue to come in, the hurricane does not seem to be having a measurable effect on global reinsurance rates. According to Reuters and Insurance Journal, global reinsurance rates are expected to drop as much as 7.5% after the January 2018 renewals.
Reinsurers are the ones who help insurers shoulder the massive costs that are incurred during a larger disaster event, like Hurricane Harvey. Every year, the reinsurers come together in Monte Carlo to work out the deals with insurers for the following year.
Over the last few years, reinsurance rates have been steadily dropping. Analysts are not surprised by this drop as it is directly correlated to a steady increase of competition in that sector. While a major disaster event can have an effect on price, Harvey only produced an estimated $10-$20 billion in total insurance losses–not enough to reverse the declining trend according to analysts from S&P Global and Fitch.
It’s important to note, that these current projections are based on the damage caused by Hurricane Harvey. These drops could significantly flatten depending on what happens the rest of this hurricane season. Hurricane Irma is quickly on the heels of Harvey as it gains power and appears to head directly for Florida. Irma alone could have a significant impact on the new reinsurance rates depending on how much damage it causes to the U.S. mainland.
The bottom line is this: global reinsurance rates continue to steadily decline, but this pattern could be interrupted by an unusually active hurricane season. How much of an effect will these hurricanes have? We’ll have to wait to see until the end of the season when the full scope of the damage caused can be seen and analyzed. Knowing what we know now, we can expect the steady decline of reinsurance rates to continue into the at least the next year.