The 1st View report, entitled ‘Reinsurers Clear the Sandy Hurdle’ finds that, in general, International rates for Property Catastrophe business are risk adjusted flat to -5% and U.S. rates for Property Catastrophe are risk adjusted flat to -5% on loss free accounts, and +10% on loss impaired accounts.
In the report’s opening letter,
According to the report, internationally, Sandy has caused little impact, and despite the addition to the market of new capital and promising 2012 underwriting results, it is the repercussions of the global financial crisis which still influence conditions and pricing in the sector: investment returns are dwindling, primary companies in most mature markets are finding growth difficult and larger primary insurance groups are restructuring the way they buy reinsurance.
The report highlights that 2012 has been particularly difficult for the Marine market, which has suffered one of its worst underwriting years in recent history. Already suffering from the Costa Concordia and the deterioration of the
Many buyers have increased retentions on loss hit programs to help mitigate rate increases which are a minimum of +15%, even on loss-free offshore Energy excess of loss contracts. The P&I market is seeing minimum of 10% increases with International Group Reinsurance Program +40%.
Other renewal trends highlighted in the report include:
• The capital base of the global reinsurance industry remains adequate and has benefitted 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
Commenting on the conclusions of the report,
“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. Final terms and conditions have, in most cases, been in line with client expectations, as reinsurers largely delivered on the undertakings they made in the run up to renewal.”