LONDON (Reuters) – Global property catastrophe reinsurance rates ranged from being unchanged to falling by “mid- to high-single-digit” percentages in July, reinsurance broker Guy Carpenter said on Monday, following years of rising rates.
Insurers tend to renew their reinsurance contracts on specific renewal dates, including on July 1.
Reinsurance – insurance for insurers – in Florida, California and other areas prone to natural catastrophes like hurricanes and wildfires has risen sharply in recent years due to heavy losses, partly as a result of climate change.
The high prices have boosted reinsurers’ profitability, giving them scope to reduce rates this year, said Lara Mowery, global head of distribution at Guy Carpenter.
“Pricing is adjusting to the new environment.”
Insurers often pass changes in reinsurance pricing onto their corporate and retail customers.
The price reductions come despite nearly $50 billion in global catastrophe insured losses in the first half, 8% above the five-year inflation-adjusted average. U.S. severe convective storms were the main driver for the losses, Guy Carpenter said.
Catastrophe bonds, a way for institutional investors to get exposure to catastrophe risk, had a record first half of $11.9 billion in issuance, Guy Carpenter said. Catastrophe bonds generally pay a good return but do not pay out if a specific catastrophe is triggered.
Reinsurance broker Aon (NYSE:) also said that property catastrophe reinsurance rates fell for U.S. national and Florida specialist insurers during the mid-year renewal season.