US nat cat rate growth could yet hit fabled 50% mark post Hurricane Ian

Global reinsurers could yet take the much-discussed 50% increase in rates on US nat cat and a 33% increase to the industry’s key rate-on-line index after Hurricane Ian tipped the market scales, analysts at Wells Fargo are now telling investors.

"We believe that Hurricane Ian (with an estimated $50 billion+ of insured losses) has the ability to spark the catastrophe reinsurance market," Wells Fargo analysts wrote in their latest research.

A 33% rise in the Guy Carpenter Rate on Line (ROL) index "seems possible to us as current expectations are that rates could rise by 50% in the US and by a good amount in Europe as well as reinsurers are looking for material rate, or they are not willing to write business."

With momentum holding through the variety of 2023 renewals, catastrophe reinsurance premium growth in 2023 could hit neighbourhood 30%, Wells Fargo believes.

Even that estimate "is still conservative" and "still not fully captured in the consensus" if rates match their upside potential.

Every market renewing over the next twelve months has suffered more than its share of nat cat in 2022, a year again pushing the $100 billion nat cat loss mark.

For January 1, Europe cites windstorms and French hail, for April 1, 2023, Japan names typhoon Nanmadol, and for the mid-years, Florida points to Hurricane Ian and its continuing claims escalation.

Capacity shortfalls remain the linchpin. Talk after Monte Carlo had chiefly been of a $20 billion capacity shortfall, a hole that has only gotten deeper as inflation stokes demand and new capital steers clear.

Only Beazley has added capital for capacity, but sums in the several hundred million do little against the tens of billions in decline in traditional capital.

Alternative capital has not risen at all in recent years from its anchor point near $95 billion and "we believe the level of alternative capital could be on a downswing in 2023" following 2022 losses and the end loss of yield chasers as interest rates have risen.

The improving outlook was sufficient to merit forecast upgrades for Arch Capital, Everest Re and Renaissance Re rendering high single digit upgrades to price targets.

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.