AON Benfield: Increasing reinsurance rates may be relatively short-lived
"The insurance recovery ratio of 40% once again highlights the protection gap evident in even the most developed markets".
The main driver of losses in 2017 was made by the three Atlantic hurricanes in the third quarter - Harvey, Irma and Maria - which are estimated to have caused economic losses of USD 200 billion and insured losses of USD 80 billion.
At the same time, AON Benfield noted in its January 2018 Reinsurance Market Outlook that following 2017 NatCat events the reinsurance pricing has moved up "in lines and territories most affected by recent losses, but we expect this trend to be relatively short-lived, given the amount of new capital entering the sector. This may have long-term consequences for the structure of the reinsurance market".
Despite a number of costly events, the losses in 2017 have been absorbed without compromising the availability of reinsurance capacity. Recent events provide the first real test of an alternative capital sector that supplied almost USD 90 billion of capacity in 2017, up from only USD 10 billion in 2005.
"The sector has therefore proved its worth and come of age as a committed source of reinsurance capacity. Against this backdrop, the January renewals were late, but orderly, with strong competition evident in many sectors", explains Aon Benfield.
Click here to read the "January 2018 Reinsurance Market Outlook".