Reinsurers open premium hike floodgates

For 2011, Lloyd’s posted its worst result since the US 2001 terror attacks: the loss was £516m ($819m), and elsewhere others in the reinsurance arena have been suffering. Estimates many made earlier of the quantum of losses have turned out to be too modest, and globally 2011 produced $100bn of property and casualty claims.

Under that yoke, reinsurers have broken the logjam of recent years and have levered up premium rates, mostly in catastrophe-impacted areas.

One of the heaviest insured loss tolls is feeding from the 2011 New Zealand earthquakes, with the burden increasing relentlessly, and reckoned currently to be in excess of NZ$20bn (US$16.5bn). Such has been the shock from the Canterbury quakes to the Kiwi market that some risks may no longer be able to attract full insurance cover.

Poor New Zealand has had a basinful. Floods in the South Island coastal region around Nelson in December 2011 led to a further NZ$14.6m of claims. The Insurance Council of New Zealand forecast that there are likely to be long term changes to terms and coverage of severe risks. John Lyon, president of the council, has said that there will need to be dialogue between insurers and government, banks, and business representatives.

Beyond New Zealand, the collection of calamities will prove a headache for managers of property in ports located in zones in jeopardy of earthquake and hurricane activity; and there is concern over pricing and scope of cover for business interruption, highlighted by floods in Thailand, and in Australia where the routes taken by commodities to the quayside were washed out.

Despite the loss of the Costa Concordia, tornadoes in the US, and earthquakes in Mexico and Chile, the first quarter of 2012 saw a far lighter insured loss total than early 2011.

Reinsurance broker Guy Carpenter & Co reported that April 2012 renewals continued the hardening rates trend set in January. Unsurprisingly, most of the burden appears to have been borne by Australian and New Zealand cedants, and the Japanese market in the light of the Tohoku earthquake and tsunami.

The next significant renewal date, July 1, will see continuing pressure feeding through to the ultimate clients and port and terminal operators will unlikely escape unscathed.