Excess of Loss (XoL) motor reinsurers are expecting a £5bn loss from changes to the Ogden rate and are considering rate rises of up to 50% to quickly make up any loses.
The Ogden rate was cut by 3.25%, higher than the market expected, which could create a much harder market in many lines following a prolonged softening of the market.
It has been reported that many expect reinsurers to take between 70% and 80% of the cost of the change in the Ogden rate leading the reinsurance market to heavy losses. Some have already told the market what they expect to lose due to the changes with Novae forecasting a £55mn impact, XL Catlin $75mn and Axis $50mn.
How far the market can push rate increases at renewal remains to be seen with one senior motor executive saying they would be aiming for a 50% increase but can’t accept any lower than a 20% rate increase. It has been reported that many are looking for a 30% to 50% increase with analysts thinking this would be conceivable.
Analysts have also said they expect an increase in the number of entrants to the market with many exploiting the post Ogden rate increases; this will make the market more competitive.