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Insurers: Natural Disasters Forcing Rate Hikes

Insurers: Natural Disasters Forcing Rate Hikes
Ahmadiyya Muslim Youth Association members remove flood damaged drywall from a home in the Westbury neighborhood of southwest Houston, Texas on Sept. 1, 2017. (Mandel Ngan/AFP/Getty Images)

By    |   Thursday, 28 December 2017 11:59 AM

Insurers are feeling the strain from 2017's costly natural disasters which are forcing rate hikes among many companies.

Hardest hit are the U.S. reinsurance companies expected to pay for over half of all claims arising from the string of natural disasters that recently swept across the U.S., according to The Wall Street Journal.

A reinsurer is responsible for taking on all or part of the risk covered by an insurance company, according to The Economic Times, and in wake of the Atlantic hurricanes, Mexico earthquakes and California wildfires, the rate of property-catastrophe reinsurance could increase by 20 percent for some clients in parts of the U.S., The Wall Street Journal said.

This could lead to higher insurance premiums for millions of people and businesses as primary insurers jack up their prices.

Dean Klisura, a senior executive with Marsh & McLennan Cos.'s Marsh insurance brokerage, said about half of the company's U.S. clients were subject to a 3 percent price hike in property insurance over the past few months, The Wall Street Journal reported.

Others were seeing double-digit increases, while leading global financial service provider, Morgan Stanley, projected U.S. property-catastrophe reinsurance prices to rise from 10 percent to 20 percent next year for accounts that suffered severe losses in 2017.

"We expect double-digit rate increases in property cat reinsurance, with more in the 'retro' market," a Morgan Stanley research note said, per Business Insurance, earlier this year.

"We think a confluence of factors will lead to a cycle turn: (1) record losses significantly impact earnings and weaken industry capital cushion, (2) we are at a very low pricing point back to pre-9/11 levels, and (3) alternative capital could face material losses or be "tied up" in protracted claim process," the report said.

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Costly natural disasters in 2017 are expected to drive up insurance rates among many companies.
insurers, natural disasters, rate, hikes
Thursday, 28 December 2017 11:59 AM
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