Property catastrophe reinsurance rates are expected to increase by double-digits in 2022, as reinsurers absorb and then react to the costs of more natural catastrophe loss events that are deemed linked to climate change, according to rating agency Fitch.“We expect double-digit percentage premium rate rises for property catastrophe cover in 2022 due to the excess losses in 2021 and the prospect of higher natural catastrophe claims frequency and severity in future,” Fitch Ratings said.Adding that, “This would make 2022 the fifth successive year of price rises.” In an update, the rating agency noted that major global reinsurance firms have all called for higher reinsurance pricing in comments made around the virtual Monte Carlo and mostly virtual Baden-Baden meetings this year.The reason for the forecasts of additional reinsurance market hardening is “largely due to increasing natural catastrophe claims linked to climate change,” Fitch explained.

Rising prices have been seen as positive for the sector, driving Fitch to suggest earlier this year that reinsurance market conditions are improving and the outlook more stable.However, “Natural catastrophe claims have become more frequent and severe in recent years due to climate change.We expect 2021 to become one of the five most costly years this century for global reinsurers,” Fitch said.

As a result, the global catastrophe loss total for 2021 is again expected to exceed budgets for reinsurers, the rating agency believes.Leading Fitch to forecast double-digit reinsurance rate increases for property catastrophe risks at the 2022 renewal seasons, which is roughly aligned with .Although, in our survey, only 18.3% of respondents called for double-digit increases for US property catastrophe risks, while .

The expected price increases will help to bolster reinsurer profits, Fitch said, as they feed into more positive underwriting margins.“Higher prices are making the sector more resilient to the effects of climate change on natural catastrophe claims patterns,” Fitch continued.Adding that, “Reinsurers have shown discipline in prioritising pricing for increased risk rather than seeking to undercut competitors to gain market share.” On top of this Fitch believes that, “The growth of catastrophe bonds to pass risk directly to investors could also become an important factor to mitigate the sector’s exposure to climate change risk in the coming years,” a fact we’ve been stressing for many years now.

Prospects for the renewal season look good and with capital increases unlikely to be significant this year, compared to 2020, there is far more likelihood of substantial property catastrophe reinsurance rate increases this time around.Availability of retrocession could also be a factor, as costs will rise for retro protection and its availability is likely to shrink again, meaning that reinsurers may find they cannot hold as much risk, or need to secure price improvements to make it worthwhile writing more cat risk.———————————————————————.

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