LONDON, Sept 6 (Reuters) - Global reinsurance prices are likely to fall by up to 5 percent when contracts are renewed in January 2018, though heavy losses from Hurricane Irma could halt those declines, Moody’s analysts said on Wednesday.
Reinsurers, who help insurers shoulder the burden of large losses in return for part of the premium, meet next week in Monte Carlo to negotiate next year’s deals with insurers after five years of price weakness amid strong competition.
Moody’s analysts told a briefing that property reinsurance rates were likely to fall by up to 5 percent and casualty reinsurance prices by up to 2.5 percent next year, despite losses from Hurricane Harvey, they said.
That echoed similar comments this week from rivals S&P and Fitch.
However, the potential for severe damages as a result of Irma, one of the most powerful Atlantic storms in a century and which is currently hitting the Caribbean, could put the brakes on any price declines.
“If Irma does hit Florida, there will be substantial losses and that could lead to some stabilisation of pricing,” Senior Credit Officer James Eck said.
Market specialists do not expect any catastrophe bonds to be triggered by Harvey but Eck said there could be non-payments if Irma hits Florida, which he said had been “a real focus of the cat-bond market in recent years”.
Catastrophe bonds typically pay a large coupon but investors lose their principal if a specified catastrophe occurs.
Despite pricing pressures, Moody’s raised its outlook for global reinsurers to ‘stable’ from ‘negative’ due to their balance sheet strength. (Reporting by Carolyn Cohn; editing by Simon Jessop and Jason Neely)