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Rate increases 'negligible' at Fla. property reinsurance renewal, says JLT Re

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Rate increases 'negligible' at Fla. property reinsurance renewal, says JLT Re

Prices for Florida property and catastrophe reinsurance cover increased by a "negligible" 1.2% at the June 1 renewal despite industry expectations of higher increases following an active and destructive hurricane season in 2017, according to reinsurance broker JLT Re's price index.

The Jardine Lloyd Thompson Group PLC-owned reinsurance broker said in a report on the renewal that the increase had "once again [failed] to meet early market expectations." The modest increase compared with a 5.1% rate reduction at last year's June 1 renewal, but was lower than the rate increases recorded at the Jan. 1 renewal, despite a greater number of loss-affected reinsurance programs renewing on June 1 because of Hurricane Irma's landfall last year. Pricing for the Florida P&C space is down 40% from 2012 levels and just 13% higher than the prior cyclical low reached in 1999 and 2000, according to JLT Re.

JLT Re North America Executive Vice President Brian O'Neill said the June 1 renewal was "highly competitive, reflecting abundant capacity and only moderate increases in demand despite the market suffering its most expensive catastrophe loss year on record in 2017." The broker said that the insurance-linked securities markets were "vigorously looking to deploy capital" at the renewal, which "inevitably put traditional reinsurers under pressure to defend market share."

June 1 renewals are dominated by Florida P&C reinsurance business. The Jan. 1 period, which is when roughly 50% to 60% of the world's reinsurance renews, are more global and diverse. Rate increases at the Jan. 1 renewals were also lower than expected.

Although the overall June 1 rate increase was muted, JLT Re said that reinsurers charged widely differing prices depending on the buyer, or cedent.

"Renewal experiences in Florida were wide-ranging, with some cedents' loss-affected layers seeing risk-adjusted rate increases in the mid-to-high single-digit range," O'Neill said. "Cedents who had demonstrated strong post-event capabilities clearly benefited from the additional capacity in the market."