Higher interest rates hit reinsurance capital, combining with climate change to push insurance costs up

THE pool of funds available for reinsurance will decline as rising interest rates and a volatile market put heightened pressure on the sector. In the long run, climate change is likely to also raise the cost of capital for reinsurers.

These pressures may eventually increase premiums for insurance buyers, said industry players and watchers.

Traditional reinsurance capital is expected to fall by US$40 billion by the end of 2022, said a report published in August by insurance credit ratings specialist AM Best. Last year, reinsurance capital had increased thanks to investment gains and low debt rates.