Analysts at investment bank and financial services firm Goldman Sachs said they expected risk-adjusted reinsurance rates in Australia to fall by 10-15% when policies come up for renewal on July 1, with the drop likely to be near the upper end of the range.
Goldman Sachs analysts expect that after risk-adjusted interest rates fell at renewals in January and April, buyers will enjoy favorable rate cuts at renewal mid-year and prices will return to levels seen in the early 2020s.
Despite warnings that Australian interest rates will fall by up to 15%, analysts stress that this downward trend is unlikely to be a floor for reinsurance rates.
This is because many reinsurers’ ROEs remain adequate and remain above long-term averages, a trend likely to be further supported by benign loss experiences.
Analysts pointed out that globally, the rate cuts were consistent across all major markets and failed to reflect the starting position of interest rate adequacy in each region.
Goldman Sachs added that the global pattern of interest rate adequacy is becoming increasingly fragmented and uneven as markets in Australia, Africa and China are experiencing nearly identical rate cuts regardless of local risk profiles.
