PCI TODAY Monday October 16, 2017
Rates will now increase
as reinsurers refill their
depleted cat reserves
Reinsurance rates will increase almost across
the board in the aftermath of losses from
hurricanes Harvey, Irma and Maria as reinsurers
“refill the buckets” in anticipation of future cat
losses, Axel Freiboth, managing director, North
America, told PCI Today.
He said that any changes in rates will vary by line
and will differ between the primary and reinsurance
sides in some instances. But he expects that rates
on US property insurance will increase across the
board and this will also be reflected on reinsurance
“Through a combination of many years of rate
decreases and these recent losses, reinsurers have now
depleted their overall cat fund—they need to refill the
bucket to pay future claims,” he said. “I also believe
that markets that have not been directly affected by
losses will need to carry some of the burden.”
Freiboth said he has seen signs of a wider
hardening of the market on some of the first
indications on renewals pricing on other lines
including marine. “There are signs of an overall
momentum for rate increases,” he said.
(Continued top of page 4)
More players are drawn to
mortgage reinsurance by its
growth, innovation, returns
The mortgage reinsurance markets have
continued to develop and mature to the
extent this product now represents a mainstream
line of business for the growing number of
reinsurers operating in the space, Joe Monaghan,
leader of Aon Benfield’s US credit & guaranty,
and government practice, told PCI Today.
“In the past 12 months five more reinsurers
have started writing this type of business, meaning
around 42 re/insurers are now operating in this
space,” Monaghan said.
“While it’s a very stable market, there are
areas where innovation is occurring and the
potential for growth is great, especially if market
share can be taken from the bond markets, which
also take on this risk.”
Mortgage reinsurance, which has opened its
doors only in the past four years to re/insurers,
has become a lucrative new market providing
much-needed growth and diversification for
those willing to take the plunge.
The US mortgage credit business has a very
different risk profile compared with what re/
insurers are used to writing. The reasons for its
opening up are unique and (Continued top of page 2)
Casualty remains tough but pockets of opportunity will emerge
The casualty market in the US remains
competitive for reinsurers, with rates still
very soft in several lines of business and loss
trends increasing. But there remain pockets of
opportunity and rate decreases will likely slow in
the aftermath of the recent hurricane losses.
That is the view of Jennifer Stevens, senior
vice president, casualty, Swiss Re, who told PCI
Today that while it remains a tough market for the
reinsurer to navigate, she remains optimistic that
change is on the horizon.
“It is no secret that we have been in a soft
market for some 10 years—it is an environment
we are all trying to handle,” she said.
“It has not been helped by the prolonged low
interest environment that has also made investment
returns hard to come by. On top of that we are
seeing increases in loss trends in some areas.”
Stevens said this phenomenon first emerged
in the auto business. Carriers that have this as
a significant part of their portfolios have been
trying to understand the driving forces behind
this so they can react.
“We have seen increases in the frequency and
severity of claims and we are trying to understand
that. The concern is that this also starts to occur
in other areas of liability business,” she explained.
“We are monitoring that carefully so we can
stay on top of pricing. It is in everyone’s interests
to have a healthy and sustainable market.”
A trend highlighted recently is inflation
in medical expenses claims. Overall, medical
expenditures are rising compared to prior years.
This is a possible signal of rising medical inflation
which drives bodily injury claims costs upward.
“We are watching that area carefully,” she said.
Another challenge is the growing propensity
of individuals to sue as American society
becomes more litigious. “We are watching the
implications of that carefully,” she said.
The landscape offers reinsurers opportunities
as well as challenges, (Continued bottom of page 2)
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DAY 2: Monday October 16 2017 | PCI TODAY | 1