Fitch pins property cat renewal rate gain ‘well over 10%’ for 1.1 ‘23

Property cat reinsurance rates are on track for gains in excess of 10% at the January 2023 renewals, the  Fitch ratings agency has said.

“Reinsurance rates for property catastrophe should increase by well over 10% when contracts are renewed in January 2023,” Fitch analysts wrote. Insured losses of about $120 billion and “the increasing frequency and severity of natural catastrophe claims” will be foremost amongst drivers, they say.

Property cat rates will be most pronounced in the regions worst affected by natural catastrophe events in 2022, including Australia, Florida and France, Fitch noted.

Capacity could prove tricky, with only "selective" capital inflows to date attempting to counterbalance the more common "partial or total withdrawals" by other major names.

Despite constraints, Fitch expects everyone will have a chair when the music ends.

"We believe demand for property catastrophe reinsurance during the 2023 renewals season will be broadly met," analysts wrote. Florida could remain an outcast.

Significant rate gains could spread outside property cat and Fitch names marine and aviation first in line, citing the kick-on effects of the war in Ukraine.

Rate gains for liability lines "should be more muted" given the redirection of some capacity away from property into these lines, Fitch believes. Claims inflation may begin to catch up in liability vis-a-vis the property inflation in 2023.

The hardening property market triggered an upgrade to the overall earnings outlook for global reinsurers.

For the broader global reinsurance market, Fitch is currently forecasting net written premium growth of 9.5% to $174 billion in 2022 ahead of 9.0% growth in 2023.

Fitch expects a combined ratio to come down 4.1 percentage points to 94% in 2023, with forecasts suggesting the improvement could come from reduced cat losses. Accident year combined ratios ex-cat and excluding pandemic and Ukrainian war one-offs will be d0own a milder 0.8 percentage points.

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