Renewal Rates: Is a Turnaround in Sight?
With US$344 billion in global economic losses, 2017 was the costliest year on record for weather disasters, according to Aon Benfield’s catastrophe model development team. Weather related events caused 97% of the 330 natural catastrophe events in 2017. Losses from natural catastrophe events were 93% higher than the 2000 to 2016 average.
Insured losses for the private sector and government-sponsored programs came to US$134 billion, just behind the record of US$137 billion set in 2011. Aon Benfield’s report further noted that 36% or about US$80 billion of the economic damage from Hurricanes Harvey, Irma and Maria (H.I.M) was insured.
An aberration or the new normal hurricane season?
So how will these losses affect renewal rates locally?
In general, for the 2018 January renewal season, reinsurance pricing stopped its downward trajectory, reaching an inflection point in the underwriting cycle. While it is still early in the year, reinsurers have not imposed the level of rate increases on insurers than were initially anticipated. An increase of 5% has been the general response so far, with higher increases levied on those territories in the Harvey-Irma-Maria pathway.
Insurers have slammed the brakes on further rate reductions for their own insureds. Some of our island neighbours have been getting rate increases ranging from 25% to 35% on homeowners and about 10% – 13% for commercial businesses.
Our own homeowners with renewals early in the year may actually see slight reductions since these terms were negotiated well in advance, however other homeowners will be lucky to retain their existing low rates. Commercial properties may also anticipate single digit increases in this first half of the year.
Given the recent upsurge in seismic activity and overall criminal activities, all insureds should take advantage of the existing low property rates to revisit the sums insured on their properties.
Gross Premiums vs Gross Claims for Trinidad Non-Life Insurance Companies (TT$Mn)
|Date||Gross Premium Property||Gross Claims Property||Gross Premium Motor||Gross Claims Motor||Gross Premiums Total||Gross Claims Total|
Source: Central Bank of Trinidad and Tobago Liability and Group lines not shown