Reinsurance earnings will be strengthened by increasing prices and higher investment income amid rising interest rates.
According to a Moody’s Investors Service report, сatastrophe losses and a heightened perception of risk following the pandemic have fuelled an increase in demand for both primary commercial and reinsurance property and casualty (P&C) protection.
That these losses, alongside climate change concerns, have been a catalyst for a sector-wide reassessment of catastrophe risk, with many reinsurers beginning to pull back capacity.
Most reinsurance buyers surveyed by Moody’s foresee an increase in prices, with 40% expecting price rises of more than 7.5% in property lines. This marks the third consecutive survey where respondents expected no overall price decline in P&C reinsurance.
Inflation remains a key threat, with rising material and labour costs, exacerbated by the impact of post-pandemic supply chain disruption, already holding back earnings improvements in home, commercial property, and motor (re)insurance lines.
Sustained high inflation could also increase long-term care and medical costs, elevating claims, and reserving risk in long-tail liability lines.