(Reuters) — Global insurers face a testing 2023 as reinsurers hike rates on key business lines by as much as 200% from Jan. 1 and pull back from underwriting risk in Russia, Ukraine and Belarus, reinsurance brokers’ reports showed Tuesday.
Reinsurers insure insurers, and Jan. 1 is the most important date for reinsurers to renew and adjust pricing of 12-month policies in light of major economic or geopolitical changes, such as the war in Ukraine, which broke out last February.
Reinsurers have suffered sharp losses from the conflict and from natural catastrophes such as Hurricane Ian in Florida, which broker Howden described as the second most expensive natural catastrophe ever in terms of insured losses.
“The sector is experiencing its most acute, cyclical price increases since the 2001-2006 period, if not before,” said David Flandro, head of analytics at Howden in a report.
Reinsurers are cutting their exposure to hurricane risk, with U.S. property reinsurance rates rising by as much as 150% in worst-hit areas at Jan. 1, Gallagher Re said in a separate report.
Aviation reinsurance rates, heavily impacted by hundreds of stranded aircraft in Russia, rose by as much as 200%, Gallagher Re said.
Hurricane Ian and other natural catastrophes caused an estimated $115 billion of insured losses globally last year, well above the 10-year average of $81 billion, reinsurer Swiss Re estimated last month. Climate change is partly to blame for the increased losses, industry sources say.
Any rise in rates demanded by reinsurers is likely to be passed on by insurers to their corporate clients, risking insurance becoming more expensive and harder to buy, industry sources say.
The market has also added exclusions, which means that from Jan. 1 “it is very difficult to find cover” for Russia, Ukraine and Belarus, Gallagher Re International chairman James Vickers told Reuters.
Some insurers have already backed away from providing cover in those countries due to the risk of sanctions or of steep losses.
Without reinsurance, insurers are likely to be even more reluctant to provide cover for the region, industry sources say. Ship insurers have already said they are pulling out as a result.
Gallagher Re, Howden and Guy Carpenter said this year’s renewal discussions between reinsurers and insurers had been particularly fraught, and some terms had been agreed to at the last minute.