Florida renewals fall short of expectation
JLT Re says Florida property-catastrophe reinsurance renewals posted low single-digit rate increases at the start of the month, as plentiful capacity muted expected gains.
“Overall, the renewal was highly competitive, reflecting abundant capacity and only moderate increases in demand despite the market suffering its most expensive catastrophe loss year on record [last year],” North America EVP Brian O’Neill said.
JLT’s risk-adjusted rate-on-line index gained 1.2%, the first increase in seven years. This compared with a drop of 5.1% last year, but was short of early market expectations.
Pricing for the Florida business remains 40% down on 2012 levels and only 13% above the previous cyclical low of 1999/00.
Renewal experiences varied, with cedents that demonstrated strong post-event capabilities benefitting from the market’s additional capacity. JLT estimates dedicated sector capital will be at record levels by the end of this month, recovering from a modest dip last year.
Capital has grown more than $US10 billion ($13.2 billion) in the first half, following about $US7 billion ($9.2 billion) of new capital raised in the final four months of last year.
“This affirms the now established trend of third-party capital rapidly entering the sector post-loss to fill the gap more or less immediately,” Global Head of Analytics David Flandro said.
The negligible gains this month contrast with previous experience, when large-loss years were often followed by double-digit rate increases.z