Lloyd’s insurer Novae believes the heavy burden of natural catastrophes in the first quarter of 2011 could improve pricing.
The company said in its interim management statement that rates on renewal business during Q1 2011 had fallen by an average of 2%, compared with a 2% increase in the same period last year.
This reflects the disproportionate amount of reinsurance business renewed in the period, the price of which did not reflect loss experience during the quarter.
However, the company added that while its board initially expected rates to remain flat in 2011, “following the events of the first quarter, some increase in rates for the year as a whole is now more likely.”
The industry has been hit by losses from flooding in Australia and earthquakes in New Zealand and Japan since the turn of the year.
Novae’s combined loss estimate from these events remains unchanged at between $60m and $80m.
Novae wrote gross premiums of £218.7m in Q1 2011, up 31% on the £167.2m it wrote in last year’s first quarter. This represented 34% of the planned gross written premium for the year. Some 43% of the premium written was for Novae’s insurance business, while the remaining 57% was for reinsurance.
While gross written premium is up, investment income has fallen sharply, declining 58% to £3.7m from £8.9m. This represented a 0.33% return on average assets compared with 0.85% in Q1 2010. The company is targeting a total return on assets for the year of 1.5%.
