By Noor Zainab Hussain
(Reuters) - JLT Re's global property-catastrophe reinsurance index fell 1.2 percent at the key Jan. 1 policy renewal season, the broker said on Wednesday, dashing the industry's hopes of higher reinsurance premiums after the second straight year of big losses.
Reinsurance prices have fallen in recent years as traditional reinsurers face competition from new players and products such as catastrophe bonds, but industry giants were hoping for higher rates after facing the most costly quarter on record in 2017.
However, prices did not rise as much as expected, hurting expectations of what would have been the first major reversal since Hurricane Katrina in 2005, the costliest natural disaster in U.S. history.
"Despite another active catastrophe year in the United States, property-catastrophe rate changes were modest," said Ed Hochberg, chief executive officer of JLT Re in North America.
JLT Re said rate increases were restricted to categories which had suffered substantial losses or where performance had worsened.
Insurers and reinsurers faced a bill of $80 billion from several catastrophes in 2018 including hurricanes Florence and Michael, typhoons Jebi, Mangkhut and Trami, flooding in Western Japan and the California wildfires.
Together, 2017 and 2018 represent the costliest two-year period ever for insured catastrophe losses, with a hefty bill of $150 billion in 2017, JLT Re said.
Investor appetite for the reinsurance sector softened in the fourth quarter of 2018, especially when compared with the same period in 2017, the broker added.
"Loss experiences and the macroeconomic environment will play an important role in shaping the reinsurance market in 2019," said David Flandro, global head of analytics at JLT Re.
"Another large-loss year could test the limits of carriers' capital resilience, as well as investors' appetite for reinsurance at a time of capital market volatility."