Reinsurers hike rates, exclude Russia and Ukraine: brokers

GLOBAL insurers face a testing 2023, as reinsurers hike rates on key business lines by as much as 200 per cent from Jan 1, and pull back from underwriting risk in Russia, Ukraine and Belarus. This was indicated by reinsurance brokers’ reports on Tuesday (Jan 3).

Reinsurers insure insurers, and Jan 1 is the most important date for reinsurers to renew and adjust the pricing of 12-month policies in light of major economic or geopolitical changes, such as the war in Ukraine which broke out in 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 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.

Reinsurers are cutting their exposure to US hurricane risk. On Jan 1, US property reinsurance rates rose by as much as 150 per cent in worst-hit areas, 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 per cent, it said.

Hurricane Ian and other natural catastrophes caused an estimated US$115 billion of insured losses globally last year, well above the 10-year average of US$81 billion, reinsurer Swiss Re estimated last month. Climate change is partly to blame for the increased losses, industry sources said.

Sources also said that any rise in rates demanded by reinsurers is likely to be passed on by insurers to their corporate clients, meaning that insurance is at risk of becoming more expensive and harder to buy.

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’s international chairman James Vickers said.

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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 said. 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 that some terms had been agreed at the last minute. REUTERS