Kathmandu. The global reinsurance market is expected to moderate in the medium term, despite long-term growth prospects due to demand driven by climate change.
According to Morningstar’s latest regional outlook, rising global temperatures are increasing the severity of natural disasters. “This is driving up the need for insurance and reinsurance,” Morningstar said in a report. This excess capacity is pushing prices down, especially at property disaster lines. ’
The report said that the reinsurance cycle, which was tightened after a big loss in 2021, has now reached a soft border. “Risk-adjusted prices have begun to decline,” the report said.
Hannover Reilly reported a 5.4 percent drop in natural disaster damage coverage during the January renewal period. Munich Rei also showed a 2.5% drop in risk-adjusted prices in its April renewals. While the score showed that prices in climate-affected lines in North America and Europe fell by up to 15 percent, the report said.
Despite a 7 per cent rise in premiums in January, Swiss Riley also faced lower risk-adjusted prices in the middle of the year.
Morningstar expects earnings to decline over the next few years as reinsurance companies’ profits remain stable and falling prices weigh on results. The company estimates that the industry’s revenue could reach its lowest point around the year 2028.
Among the major reinsurance companies, SCORE is considered to be the least vulnerable to natural disaster risk and is expected to offer better returns than competitors.
In contrast, Swiss Reel is expanding its Natural Catastrophe Book. Which Monningstar said could further destabilize its revenue in the near future.
