The Australian reinsurance market remains very much in buyers’ favour despite the string of natural disasters that hit the Asia-Pacific region in the last few months, reinsurance broker Guy Carpenter says.
Unless a “really big” Australian catastrophe hits, it’s unlikely the upcoming January renewal season will produce a price breakthrough for reinsurers.
In Australia it has been a relatively benign catastrophe season so far. The last major natural disaster to hit was Cyclone Debbie last year, leaving insurers with a bill of nearly $1.78 billion and making it the second most costly storm in the country’s history after Tracy in 1974.
“It’s a pretty stable market,” Guy Carpenter Life and Capital Asia MD Matthew Rose told insuranceNEWS.com.au.
“Unless [there is] a really big Australian catastrophe, I don’t think pricing will really change that much. It’s going to be a global catastrophe that affects pricing dramatically.”
For Asia-Pacific, the jury is still out on whether rates will be affected by the earthquakes, typhoons and other weather perils that battered huge swathes of the region in the last few months.
The catastrophe reinsurance combined ratio in the region could hit 100-200% for the year if current estimates are correct.
“Globally, [this year] has generally been a benign year for catastrophe loss, but there were significant events that occurred in the Asia-Pacific region, in particular weather events in Japan and China,” Guy Carpenter says in a report released today.
“The region has experienced losses during the year to date, and at the time of writing, it is expected that a proportion of these will impact reinsurers.
“At the same time, market capacity remains abundant and underlying reinsurance market conditions are favourable for buyers. The effect of the 2018 losses on market sentiment going forward is not fully understood.”
Up until now, pricing for buyers of catastrophe reinsurance in the region has remained largely flat.
Even as Asia continued to crunch the loss numbers, Guy Carpenter does not expect the final figure to rattle global prices.
The region’s share of world catastrophe reinsurance premiums is still relatively modest at 15%.
“So in the absence of any large losses in the wider catastrophe reinsurance market, such numbers should be manageable for reinsurers,” Guy Carpenter says.
Typhoon Jebi remains the region’s largest event this year “by a wide margin” with insurance losses set to exceed $US5 billion ($7.06 billion).