Global reinsurance rates decrease 2%

In its annual review of the worldwide catastrophe insurance market, reinsurance intermediary Guy Carpenter & Company notes 2007 global reinsurance rates decreased 2%, compared to a 32% increase in 2006.

“The hurricanes of 2005 had no obvious impact on Canadian markets,” the report says. “However, as many of the reinsurers operating in Canada are branches or subsidiaries of foreign reinsurers that were severely affected by the storm losses, there was some pressure for higher rates on catastrophe business following these losses,”

January and July renewals — in the absence of losses or increases in exposures — saw reductions in the range of 5% to 10%, researchers added.

Researchers examined the insurance/reinsurance industry within 23 countries in the report. Referencing Canada, the report says claims from the three largest claims events thus far in the country (the 1998 Ice Storm, the 1996 Quebec Flood and the August 2006 Ontario Flood) pale in comparison to the claims and losses that might arise if a major earthquake and related fires were to strike British Columbia, Quebec or eastern Ontario.

“The potential economic damage from a major seismic event in British Columbia is estimated at Cdn$30 billion, and insured losses could reach as high as Cdn$15 billion, not all of which would be reinsured,” the report says.

The insurance loss estimate for a major earthquake in Quebec and eastern Ontario is Cdn$5 billion.