Hurricanes will help reinsurance rates to harden.
The volatile US hurricane season and the credit crunch will force reinsurance rates to harden ahead of the 1 January renewal deadline, Charles Franks, the chief executive of Lloyd’s insurer RJ Kiln, has warned.
Franks said: “Hurricane Ike comes in on the back of the crisis in the capital markets. It is the combination of Ike and all the issues in the world market that has made this a market-changing event.”
The 2008 hurricane season has been one of the most active of the past decade.
On average each year, there are 10 tropical storms, of which six develop into hurricanes. The 2008 season is just past its halfway point and there have been 10 tropical storms so far, with four building into hurricanes.
The losses from hurricane Ike could be as much as $16bn (£9.2bn) and the damage from hurricane Gustav could top $10bn.
Franks added: “We definitely see rates hardening in [property catastrophe reinsurance] going forward.
“Reinsurance is all about the provision of capital and clearly capital is a more scarce commodity now than it was this time six months ago.”
Catastrophe reinsurance rates have been falling. Reinsurance broker Guy Carpenter said rates had declined for a second consecutive year.
Rates worldwide dropped by 10% on average in 2008, compared with 6% in 2007, the broker said.
Separately, following a senior management reshuffle at the company, Franks will become chief executive of Kiln Group from 1 January 2009, while retaining his current position at RJ Kiln, the Lloyd’s managing agency.
Edward Creasy will become chairman of Kiln Group, in addition to his post as chairman of RJ Kiln.