This year, the global insurance industry saw more than $100 billion in insured losses due to natural disasters. Normally, losses are accompanied by rate increases, but many insurers have not been raising premiums as much as analysts and consumers had expected. The fact that insurers have issued only modest rate hikes throughout the world has had a profound impact on the investment business. Investors are now having trouble figuring out which companies are good targets for the 2012 fiscal year, as many have emerged from 2011 catastrophes will healthy capital levels and reserve strength.
Investors and analysts alike believed that the $100 billion mark would be more than enough to shift the insurance market from soft to hard, where insurers would have pricing power over consumers. The sluggish transition of the market is due mostly to the fact that insurance companies have been able to make a great deal of profit during a year of record breaking losses. This profit has allowed them to introduce lower-than-expected rate hikes.
Prices for property insurance have been on the rise due to recent disasters, but this accounts for only one sector of the market. Montpelier Reinsurance believes that the market is likely to see more rate hikes as the impact of the floods in Thailand makes its way through the global insurance system akin to the effects the New Zealand earthquakes had on the industry early in the year.