Zurich Insurance Group AG expects to have more power to increase commercial insurance rates than it has seen in almost two decades as a shortage of supply and high natural catastrophe payouts help reverse declining premiums.

“The last time this kind of market really existed was in 2002,” James Shea, the company’s head of commercial insurance, said in an interview. “You are seeing not just improving terms and changing premiums, you are also seeing reductions in capacity available in the market.”

Rate increases are set to help the world’s third-largest commercial insurer meet the ambitious profit targets it set two months ago. The market is rebounding from six years during which competition and relatively few large disasters gave clients more power to negotiate favorable terms.

For Zurich and rivals AIG International Group Inc and Chubb Ltd. the rising rates may ease some of the pressure from lackluster global growth, potentially higher natural catastrophe claims and U.S. court rulings that increasingly put pressure on profit.

Renewals Improve

January renewals are up 20% to 40% for some accounts, said Shea, whose unit insures corporate clients against setbacks like property damage, regulatory violations and cyber attacks. While he expects January renewals to be positive overall, he said it will take years for prices to recover to the levels of six or seven years ago. The commercial insurance unit contributes 44% of premiums to Property & Casualty, the company’s biggest business.

Figures from Allianz SE, Axa SA and Zurich Insurance suggest premium rate increases overall accelerated in the first half of 2019, according to Bloomberg Intelligence.

While higher-than-normal natural disasters increase costs for some insurers, they tend to give them more leverage in increasing rates when policies are renewed. Total insured losses for the industry around $7 billion for Typhoon Faxai in Japan and about $4.5 billion for Hurricane Dorian in the Caribbean in the most recent storm season, according to Swiss Re AG. Bushfires in Australia and California are set to increase total claims.

Zurich is the world’s third-largest insurer for businesses behind Chubb and AIG and gets around half of its commercial insurance revenues from North America. The company’s shares have been boosted by increased optimism about pricing conditions in the U.S. market and among the best performers among European insurers in the fourth quarter, according to Bloomberg Intelligence.

Zurich was little changed in Swiss trading at 401.1 francs as of 9:16 a.m. The stock has increased about 28% in the last 12 months.

(Updates with share price in final paragraph)