New Normal Prompts Reinsurer Action: Willis Re 1st View
Momentum for rate increases on loss-free reinsurance accounts dissipated during the June/July property catastrophe renewals, and in some cases, pricing declined. For example, although most loss-free
These are the findings from the latest 1st View renewals report from Willis Re, the reinsurance division of
Three trends drove the property catastrophe renewals:
* Excess capital leading to a surplus of capacity both from traditional and insurance-linked securities (ILS) markets.
* Stabilization of 2017 natural catastrophe loss estimates, which typically remain below initial projections, and often retained net by larger insurers.
* Benign loss activity so far during 2018.
Together these three factors are driving the emergence of a 'new normal' in property cat reinsurance pricing, and carriers have begun to react. Some have cut costs while others are actively reviewing the profitability of every piece of business on their books, and respond accordingly.
This approach will ultimately prove beneficial, as it promotes the discipline that ensures buyers receive long-term, stable support from financially secure counterparties, but it may yet result in challenges for some businesses. For example, with reinsurers' emphasis shifting from top-line growth to pure underwriting profitability and control, some carriers may reconsider their MGA strategy, endangering some coverholder relationships. The new pricing normal is likely also to impact M&A, as acquirers exercise greater caution and sellers adjust their pricing expectations.
Download the full report: The Willis Re 1st View report is a thrice yearly publication including specific commentary on key trends throughout the world's major reinsurance classes and regions. (https://www.willistowerswatson.com/en/insights/2018/07/willis-re-1st-view-july-2018-new-normal-emerges)
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