A flat mid-year renewal is not out of the question despite the industry taking around $140bn in cat losses last year, according to JMP analyst Matt Carletti and his colleague.

In a note published this morning, Carletti said that “at best” average rates would inch up a few points, with a “modest variance” around pricing of individual renewals.

“At first glance, it is mind boggling to us to think pricing could be within a stones’ throw of flat following one of the worst catastrophe years in history,” Carletti said.

However, he noted that it made more sense when the speed at which capital reloaded after the disasters and the quality of the modeling around Hurricane Irma - the biggest US event - were considered.

“In a nutshell, the events were not unexpected, thus forward expectations did not need recalibration, and post-event increases in supply outpaced increase in demand,” Carletti said.

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Striking a more positive note, Carletti said he saw the potential for a set of conditions that would allow property catastrophe rates to strengthen more significantly.

“It seems unlikely to us that catastrophe losses alone, particularly from well-modeled events, will materially move the needle on pricing, as it is evident there are significant amounts of capital on the sidelines waiting to come in,” the note said.

“However, with interest rates rising, we believe the calculus for some of this collateralized capital could change as rates rise further.”

He pointed to the spread between ten-year treasury bonds, which deliver a 3 percent yield and property catastrophe returns that are in the high-single digits.

“With interest rates likely to rise further over the next 12-18 months, we can envision a scenario where the return on property cat and other high-yield alternatives are in relative parity, which we believe would lead some to allocate capital away from property cat to these other better-understood asset classes,” Carletti said.

“This reallocation of capital, particularly if coupled with further catastrophe losses, would likely create an imbalance in the supply/demand equation and result in property cat pricing rising and re-establishing a modest spread versus these other instruments.”