Willis Re comments on reinsurance rates
by Gill Montia
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With 2012 natural catastrophe losses estimated at $120 billion (50% less than in 2011), Willis Re reports that most reinsurers remain within their annual catastrophe budgets.
In general, international rates for property catastrophe business are risk adjusted flat to -5%, with US rates adjusted flat to -5% on loss free accounts, and +10% on loss impaired accounts.
However, 2012 has been particularly difficult for the marine market, which has suffered one of its worst underwriting years in recent history – Superstorm Sandy is widely expected to be the largest ever marine loss.
Other renewal trends highlighted by the firm include:
• The capital base of the global reinsurance industry remains adequate and has benefited from an accelerating inflow of new capital, particularly from long term investors drawn to event risk as an alternative non correlated investment class
• It is a competitive environment for catastrophe bond issuance with third party capital activity picking up and broadening as investor demand outstrips issuer supply.
• In longer tail classes, frequency and severity of losses continue to decline and buyers continue to retain more.
• Whilst unlikely to impact retrocession market significantly, Superstorm Sandy slowed any potential downward rate movement; with clients who are buying additional vertical cover also willing to take higher retentions to maintain the same spend, limits, retentions and risk-adjusted pricing were flat in general.
• The UK Motor excess of loss market has faced very difficult and late renewals with substantial changes to both terms and conditions driven by loss activity and capacity withdrawal.
Commenting on the findings, Willis Re chairman, Peter Hearn, says: “Overall, the global reinsurance market has maintained a measured and increasingly client-centric approach by providing adequate capacity to buyers, together with an increasingly differentiated approach at a client- and class-specific level.”