LONDON (Reuters) – Global property catastrophe reinsurance rates ranged from unchanged to “mid- to high-single-digit” declines in July after years of rising prices, reinsurance broker Guy Carpenter said on Monday.
Insurance companies tend to renew their reinsurance contracts on specific renewal dates, including July 1.
Reinsurance rates — insurance for insurers — in Florida, California and other areas vulnerable to natural disasters like hurricanes and wildfires have risen sharply in recent years due to catastrophic losses, partly due to climate change.
High rates have boosted reinsurers’ profitability, giving them room to cut rates this year, said Lara Mowery, head of global distribution at Guy Carpenter.
“Pricing adapts to the new environment.”
Insurance companies often pass on changes in reinsurance rates to their corporate and individual customers.
The rate cuts come despite global catastrophe insurance losses of about $50 billion in the first half, 8% higher than the revised five-year average. Jay Carpenter said severe storms in the United States were the main driver of losses.
Cat bonds, a way for institutional investors to gain exposure to catastrophic risk, hit a record $11.9 billion in the first half of the year, said Jay Carpenter. Cat bonds typically pay a good return but don’t pay out when a particular disaster strikes.
Reinsurance broker Aon (NYSE:) also said property catastrophe reinsurance rates declined for its national U.S. and Florida specialty insurers during the mid-year renewal season.