The reinsurance hard market continues

IN previous columns, I mentioned that we are amid an unprecedented hard market as far as natural catastrophe (Nat Cat) risks are concerned. Both the January and April renewals were virtual bloodbaths for local insurers, where they experienced not only increased prices for reinsurance protection but were accompanied by a shrinking capacity as well. This was a double whammy, especially for the Philippines, which we all know is considered the most vulnerable country to Nat Cat events and therefore the one most in need of Nat Cat protection.

Indications show that the June renewals are experiencing the same fate, as no improvements have been experienced thus far. Historically, episodes of hard and soft markets are cyclical; some reinsurance market analysts, however, say that the current cycle (hard market) has not completed itself and will last probably beyond the next season, especially if the world experiences more or severe Nat Cat events. In addition, there are several concurrent constraints such as the elevated cost of capital, limited capacity and macro uncertainty that are not being resolved as fast as we would want them to be.