Reinsurance Industry Largely Unscathed by Financial Crisis: Willis Re
Broker’s Quarterly Renewals Report Shows First Signs of Hardening Market
London, UK, January 2, 2009 – The global reinsurance industry has remained
substantially unscathed by the unprecedented turmoil in the global capital markets,
with a capital base still largely intact and liquid, although access to new capital in
2009 will become more difficult and expensive in the current economic climate,
according to a new report from Willis Re, the reinsurance broking arm of Willis Group
Holdings (NYSE: WSH), the global insurance broker.
Willis Re’s “1st View,” its quarterly reinsurance market report, examines rate
movements across numerous territories and product classes and includes detailed
analysis from Willis Re’s product line experts. Bearing the title “Capital Rules,” the
report finds evidence that, with January 1 renewals, reinsurers are taking meaningful
price increases in capital-intensive lines of business, such as the U.S. Nationwide
“The unprecedented turmoil in global capital markets during the second half of 2008
has ravaged the balance sheets of many financial institutions. Reinsurers, while not
currently impaired, have recognized that in the current financial market climate,
obtaining new post-event capital will be both difficult and expensive,” said Peter C.
Hearn, CEO of Willis Re. “As a result, reinsurers are seeking to optimize returns on
existing capital bases via constrained risk appetites and elevated risk charges.”
Among the other key findings of the report are:
Primary insurance companies, facing new capital pressures, are increasing their
demand for reinsurance as they explore buy-downs and other reinsurance
mechanisms to protect and enhance their capital positions.
The manner by which cedants select reinsurance partners is shifting. With thirdparty
credit ratings no longer sacrosanct, cedants are reassessing credit risks
and are seeking to use portfolio diversification to mitigate their counterparty
exposure. One immediate impact is an increase in the syndication of risk, which
is allowing reinsurers to obtain shares in programs previously dominated by a
limited number of large players.
Judging from the market’s performance at January 1, 2009, reinsurers are
meeting the challenge of balancing their portfolio management objectives against
the real economic constraints faced by their insurer customers by offering
appropriate product, price and capacity.
“The changing capital appetite among cedants presents the traditional reinsurance
industry with an excellent opportunity to win back market share,” said Hearn. “As our
clients are confronted by an array of challenges in every country and line of business,
this report will give them a comprehensive picture of the key issues facing the market
this renewal season and help them formulate their strategies for the year ahead.”
To read the report in full, please click on the link:
Willis Group Holdings Limited is a leading global insurance broker, developing and
delivering professional insurance, reinsurance, risk management, financial and
human resource consulting and actuarial services to corporations, public entities and
institutions around the world. Willis has more than 400 offices in nearly 120
countries, with a global team of approximately 20,000 Associates serving clients in
some 190 countries. Additional information on Willis may be found at www.willis.com.
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