July 17, 2023
Reinsurance pricing will likely increase further this year despite a drop in predicted storms for the 2023 hurricane season, which began June 1, according to a report released Monday by analysts at investment bank Morgan Stanley.
Reinsurance pricing for Florida-exposed risks rose 20% to 50% during midyear renewals, and a long-term trend toward more storms and little increase in capital in the reinsurance sector will likely drive further rate hikes, the report said.
“We see a clear trend toward higher U.S. property reinsurance costs, which in our view would not be offset if we see a more ‘normal’ hurricane season,” the report said.
Colorado State University, which issues closely watched hurricane forecasts, recently amended its outlook for the 2023 season to 18 named storms, which would be two fewer than its 2022 prediction issued in July last year. The total named storms in 2022 only numbered 14.
Citing data from the U.S. National Centers for Environmental Information, though, the Morgan Stanley report noted a significant increase over the past three years in natural disasters causing more than $1 billion in damage.
“We believe U.S. property catastrophe reinsurance costs will continue to rise and believe that reinsurance providers will view a potentially normal 2023 hurricane season as ‘one off’,” the report said.
Reinsurance capital is not expected to increase sharply in the near term. “This should support reinsurance pricing heading into 2024,” the report said.