Prices climb as reinsurers aim to recover from heavy losses caused by natural disasters in 2023

Reinsurance rates for US property catastrophe policies have increased by as much as 50% as of January 1, 2024, according to a report by broker Gallagher Re. The hike comes as reinsurers seek to recover from significant losses sustained in the wake of natural disasters like wildfires, hurricanes, and earthquakes.

Reinsurers, who provide coverage for insurers, adjust their prices annually, and the renewal rates set at the start of each year often influence overall insurance costs for the next 12 months. The past year saw an estimated US$100 billion in insured losses due to natural catastrophes such as wildfires in Hawaii, earthquakes in Turkey and Syria, and storms in the US. While this figure represents a slight decline from the record-breaking losses of 2022, it remains significantly above normal levels.

For policies affected by natural disasters, reinsurers have raised rates by up to 50%. In Turkey, the rate increases were even more dramatic, with some policies experiencing price hikes of up to 100%. However, some clients who were not impacted by major natural catastrophes saw little to no change in their reinsurance rates.

Tom Wakefield, global CEO of Gallagher Re, explained that the rate increases are more nuanced and differentiated by individual client risk factors compared to previous years, reflecting the varying levels of exposure to natural disasters.

The increase in reinsurance costs is expected to have a ripple effect on the broader insurance market, potentially leading to higher premiums for consumers in the affected regions.