Reinsurers got storm-shy at 6.1 deadline as forecasts peaked: Gallagher Re
Florida property catastrophe reinsurance treaty renewals at 6.1 may have taken a last minute nudge from the rising tide of forecasts showing a very active hurricane season likely on the way, top brokers at global re/insurance brokerage group AJ Gallagher has said in a note to markets.
Forecasts out late May “helped to set a more cautious tone among some capacity providers,” Gallagher Re Florida brokers Bryan Friendshuh and Adam Schwebach wrote.
Rate softening visible for early renewals in May “levelled off as capacity became less abundant in the run-up to June 1.”
“Insurers who completed their programmes in early May were able to take advantage of an environment where supply was readily available, with many reinsurers looking to deploy increased capacity,” the brokers claimed.
“But this dynamic shifted closer to June 1, following forecasts that this year’s North Atlantic hurricane season would be more severe than average.”
Retro capacity also “seemed to dry up” and the lingering market capacity was deployed “opportunistically and at higher prices.”
Prospects for a hyper active Atlantic storm season have risen forecast by forecast, seemingly culminating in a forecast from the US Climate Prediction Center at NOAA May 23 which it called its strongest May forecast ever.
“This may have helped to set a more cautious tone among some capacity providers,” Gallagher brokers wrote.
It's a strong and rising consensus with other leading forecast institutes on record saying that record warm sea temps mixed with a move towards La Niña is a dangerous recipe.
Colorado State University’s Tropical Weather & Climate Research had already been on record saying it expects a “very, very busy hurricane season” some 50 - 75% above the 30-year average, while the UK government-supported research venture Tropical Storm Risk (TSR) upped its forecasts to points roughly 80% above the 30-year average.
Capacity was said to have increased from traditional reinsurers. “Most quoting markets indicated increased capacity, with some looking to defend their positions on programmes with competitive quotes and increased line sizes,” Gallagher wrote.
ILS may have been less supportive of Florida than might be assumed from headline issuance tallies. May issuance largely came from outside Florida, down from the trend visible in the first four months of the year, authors noted.
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