A new report from TD Cowen predicts that property catastrophe reinsurance rates will remain steady or even decrease by as much as 10% in the January 1 renewals. This is a shift from the sharp increases seen in recent years.
Reinsurance helps insurance companies manage risk by spreading large losses. Catastrophe (or “cat”) reinsurance specifically covers natural disasters like hurricanes, earthquakes, and wildfires. Over the past few years, rates have risen due to high losses from major disasters and inflation.
However, TD Cowen analysts now expect a softer market. One reason is that insurers have adjusted their risk models and rebuilt capital after recent losses. Also, new investors have entered the reinsurance market, increasing competition.
This trend could benefit primary insurers, who may see lower costs when buying reinsurance. If savings are passed on, customers might also see slightly lower premiums. However, experts warn that a major disaster could quickly change the market.
The January 1 renewal period is a key time for reinsurance contracts, especially in major markets like Florida and California. While some regions with high risk may still see rate hikes, the overall trend appears more stable than in previous years.
This forecast aligns with broader industry reports suggesting that reinsurance capacity has improved in 2024. Still, analysts advise caution, as climate change and unpredictable weather patterns keep long-term uncertainty high.
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