Rates to increase for US cat-exposed captives
IN A DEVELOPMENT that may impact
certain captives, the reinsurance
underwriting cycle may finally have
turned, although price rises look
modest, suggesting a flatter cycle,
according to a Fitch Ratings report,
Global Reinsurance: Significant
Catastrophe Losses; Modest Rate Rises.
“Group captives that have meaningful
exposure to catastrophe risk we expect
will see their reinsurance rates rising,”
said Don Thorpe, senior director at Fitch.
Thorpe explained that catastrophe
reinsurance rates for these captives
will rise most (low double digits) for
captives with US property-catastrophe
exposure—especially in the areas that
suffered losses in 2017—and less so
(single digits) outside of the US.
rates increased at January 1, 2018,
which according to recent reports from
brokers is the first rise since 2013.
Natural catastrophes caused
economic losses in excess of $300
billion globally in 2017 and insured
losses of around $130 billion, making
2017 one of the most costly years for
the insurance sector on record.
The losses had a relatively limited
impact on most reinsurers’ capital
as they were well spread between
insurers, reinsurers and capital
markets, and Fitch did not downgrade
any reinsurers as a result.
In spite of large catastrophe losses
in 2017, such as from the Californian
wildfires and hurricanes Harvey, Irma and
Maria, the rate increases were modest.
The report suggested that growth in
the alternative capital sector has altered
reinsurance market dynamics, making
capacity shortages less likely and the
underwriting cycle potentially flatter.
Fitch noted that ILS investors have
already largely replenished most of the
capital consumed by last year’s cat losses.
The agency’s outlook for the
reinsurance sector remains negative,
reflecting continued pressure on earning
from competitive pricing, alternative
capital and low investment yields. l
REGIONS INSURANCE, an employee
benefit brokerage in the US and affiliate
of Regions Bank, has appointed Mike
Breedlove as executive vice president
of property and casualty operations.
Breedlove will be responsible for
leading the P&C strategy across the
country through Region Insurance’s
network of offices in the Southeast,
Texas and Indiana.
He currently serves and will continue
his role as regional executive for the
Southeast region of Regions Insurance,
which includes offices in Georgia, South
Carolina, Florida, Arkansas and Texas. l
istockphoto / khz
Security America RRG downgraded by AM Best
RATINGS AGENCY AM Best has
downgraded the financial strength
rating (FSR) to B (Fair) from B+ (Good)
of Security America Risk Retention
Group (SARRG), a risk retention group
offering general and professional
liability coverage based in Burlington,
The outlook of the FSR has been
revised to stable from negative, and AM
Best has concurrently withdrawn the
ratings as SARRG has requested to no
longer participate in the ratings agency’s
interactive credit rating process.
SARRG’s ratings reflect its balance
sheet strength, which AM Best
categorises as adequate, as well as its
marginal operating performance, limited
business profile and marginal enterprise
risk management. AM Best also said
names P&C head
SARRG’s product concentration presents
a high degree of competition, although
the company is registered in all US states.
While the risk-adjusted capitalisation
is currently strong, the ratings
agency said it had diminished in
recent years. Additionally, AM Best
noted SARRG suffered adverse loss
reserve development and unfavourable
profitability measures. l
“Group captives that
have meaningful exposure
to catastrophe risk we expect
will see their reinsurance
Don Thorpe, Fitch