A string of disasters from Hurricanes Harvey, Irma and Maria to devastating wildfires sweeping California’s wine country have some expecting catastrophe-exposed property insurance rates to rise.
Such a rise would follow several years of limited losses, Business Insurance reports:
The recent string of hurricanes in the United States and Caribbean, earthquakes in Mexico and other storm losses earlier in 2017 ended a four-year run of limited catastrophe losses, which was accompanied by a cumulative 50% drop in property insurance rates, they say.
As a result, insures will likely push for double-digit rate increases on average for properties in storm- and quake-exposed areas of the U.S., but other lines of coverage, including noncatastrophe property and general liability, could also see higher rates, according to executives meeting at the Insurance Leadership Forum, sponsored by the Council of Insurance Agents & Brokers, in Colorado Springs, Colorado.
CNBC reports that JP Morgan estimates the combination of disasters will cost insurance companies billions. The network reports:
“We think industry insured losses from the 3Q hurricanes will approach or exceed $100bn, which should be sufficient to result in higher property insurance and reinsurance prices given it would wipe out most of the industry’s excess capital,” analyst Sarah DeWitt wrote in a note to clients Thursday.
DeWitt cited how property insurance premiums rose 10 percent after the 2005 hurricanes. She predicts similar double-digit percentage increases for U.S. property premiums starting in January 2018.
“The rise in property insurance and reinsurance prices could help the insurance brokers which should benefit from higher prices with none of the losses,” the analyst wrote. “Although the [insurance broker] stocks are up following the hurricanes, we think the increase in prices could be higher than consensus expects.”
Still, rate increases aren’t a sure thing, according to Business Insurance:
Whether rate increases will ultimately go through or be sustained remains uncertain because insurers and reinsurers still have plentiful capital, and more alternative capital is waiting on the sidelines ready to come into the market if rates rise, several executives said.
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