Reinsurance rates fell for the sixth consecutive year at the June 1 renewal amid excess capacity and strong competition among traditional and insurance-linked securities markets, according to JLT Re.
JLT Re's risk-adjusted Florida property-catastrophe rate-on-index fell by 5.1% in 2017. This was within a range of zero to negative 10% and a greater average reduction than the 3.1% decrease seen in 2016.
"While the pace of average rate reductions accelerated [on June 1] compared to last year, the results were very much determined by cedent size and performance," Bob Betz, executive vice president of JLT Re in North America, said.
JLT Re said Florida business pricing is now approximately 40% down on 2012 levels and only 10% above the previous cyclical low of 1999 to 2000. However, the changes to the Ogden discount rate in the U.K. and certain global weather-related events resulted in significant reserve charges, leading to deteriorating underwriting performances in the first quarter.
Demand for retrocession cover, which supports the reinsurance market in Florida, remained strong. Some carriers lowered retentions and bought additional layers of coverage at June 1, while others moved from worldwide covers to Florida only.
Excess sector capital allowed cedents to ask for discounts to expiring reinsurance rates even as the sector had elevated loss experiences, reserving volatility and interest rate concerns, David Flandro, global head of analytics at JLT Re, said.
JLT re is part of Jardine Lloyd Thompson Group Plc.