December 5, 2013 by Canadian Underwriter
The lack of a major U.S. Atlantic hurricane as of Nov. 30 will lead to a “low double-digit price drop” of related reinsurance in the January renewal, while pricing in some reinsurance lines covering Canadian catastrophes will likely rise, predicts New York City-based Fitch Ratings Inc.
“The Atlantic hurricane season ended on 30th November without the formation of a single major hurricane and with the fewest named hurricanes since 1982,” Fitch stated in a press release Monday.
“This will maintain the pressure on U.S. excess of loss catastrophe pricing, which has already weakened in part due to surplus capacity from the growth of catastrophe bonds and other reinsurance alternatives.”
Of U.S. hurricane risk, Fitch added that a “low double-digit price drop in the January renewal would be in line with the declines reported at the mid-year 2013 renewals.” The ratings firm is also predicting “more favourable terms and conditions for reinsurance buyers, including larger limits, multi-year agreements and better terms on the reinstatement of cover.”
But for reinsurance lines covering wind storms and flooding in Europe, Canada and Australia, Fitch predicts prices will rise.
“Other regions have been harder hit by natural catastrophes in 2013, including wind storms and flooding in Europe, Canada and Australia,” Fitch stated. “Prices in affected reinsurance lines are likely to rise, while in unaffected international catastrophe reinsurance lines these losses should limit price softening to a single-digit drop.”
Lower cat losses, Fitch added, “will result in improved operating results in 2013 for most reinsurers.”
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