In this article in Insurance Journal, Lara Mowery, Global Head of Distribution, discussed reinsurance pricing and its role in determining premium rates for homeowners insurance.
This summer, reinsurance companies such as Swiss Re and Munich Re raised their property catastrophe reinsurance premiums in the US by an average of 20% to 50%. Guy Carpenter said it was the highest increase for reinsurance rates since the year after Hurricane Katrina devastated New Orleans and the Gulf Coast in 2005.
“It’s a global problem,” Lara said. “Virtually every geography is seeing a repricing of risk.”
She went on to describe how many reinsurance firms now have resources dedicated to studying the impact of climate change on how to price catastrophes.
There have been other factors impacting the insurance industry, as well. Inflation has made the cost of repairing homes pricier and home prices remain near record levels. A labor shortage means getting damaged homes repaired may take longer, requiring insurers to pay for temporary housing for policyholders longer. Overall, calculating risk based on what happened in the past is becoming increasingly difficult.
“You can no longer rely on 100 years of wildfire data to price risk when the unprecedented has happened,” Lara explained.