A spate of natural disasters hazards such as the Australian floods, Cyclone Yasi, and the New Zealand and Japanese earthquakes contributed to the costliest quarter in the history of the facultative reinsurance market in terms of loss experience
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The scale of the losses may portend a hardening of rates, says Elliot Richardson, CEO of Aon Benfield Fac.
“We expect that rate rises will now be seen in affected territories as well as other catastrophe exposed areas,” Richardson said. “However, it is still too early to correctly state the amount. Early signs are that US property cat rates are hardening, which is an indicator that it will not be contained to affected areas only. The same is also being seen in the onshore energy and power sectors.”
Indeed, the losses are but one factor that will conspire to drive facultative rates during 2011. “Rates will be further impacted by the latest model release from catastrophe modeller RMS, the increased combined ratios that reinsurers have reported for 2010, and the effect of continued low investment returns on industry financial results,” added Stuart Beatty, executive managing director of Aon Benfield Fac APAC.