Willis Re Sees a Return of Capital to the
--Broker’s Latest Renewals Report Shows Stable Pricing and Sufficient Capacity at July 1--
London, UK, July 1, 2009 – Despite predictions of dramatic rate increases to offset reinsurer losses over
the preceding 12 months, July 1 reinsurance renewals saw sufficient capacity in virtually all areas and
a reasonably orderly rating environment, according to the latest renewals report from Willis Re, the reinsurance
broking arm of Willis Group Holdings (NYSE: WSH), the global insurance broker.
Titled, “Capital Secured,” Willis Re’s “1st View,” its thrice yearly reinsurance market report, examines rate movements across
numerous territories and product classes and includes detailed analysis from Willis Re’s product line experts.
The report found the greater stability in the reinsurance market was brought about by initial signs of
recovery in the financial markets and a lack of major underwriting losses in the first two
quarters of 2009. Anticipating a challenging year marked by exchange rate volatility and a difficult retrocession
market, reinsurers took aggressive steps early in the year to control their aggregates more tightly. According
to Willis Re, these actions, coupled with the lower open market purchasing by residual markets in
Florida and Texas, eased much of the capacity squeeze in the more demanding peak US property
In the property-intensive mid-year renewals, rate increases remained measured amid a lack of meaningful rate hardening in
the primary market. Many primary insurers continue to face soft pricing, weaker demand and reduced investment
yields at the same time that their prior-year reserve releases have largely run out, the report
said. Positive price movement in the US Casualty markets remains constrained with a number of start-up
insurers recently entering the fray and offering fresh capital.
Other “green shoots” of fresh capital also have appeared. The Insurance Linked Securities market is showing signs
of life with $1.4 billion in catastrophe bonds being issued so far in 2009, along with
a modest reappearance of sidecars and some capital increases, said Willis Re. Prices for new capital
are still very high, owing largely to the constraints on the debt markets, but the report
said “encouraging” appetite still exists for new risk structures.
Peter Hearn, CEO Willis Re said, “With very few exceptions, the reinsurance industry has managed to clear
the hurdle of providing sufficient capacity at acceptable prices to their client base for this year.
Nine months ago, this outcome was very much in doubt. Now, this relative stability will largely
hinge on whether positive pricing trends emerge in the primary insurance markets and, of course, the
level of major catastrophe and financial loss activity.”
Among the other key findings of the report are:
- Rate increases in the region of 10 percent to 15 percent were achieved in capital-intensive
classes such as peak zone US Catastrophe.
- Merger and acquisition activity has started to
pick up, as those with stronger balance sheets seek to adjust their portfolio mix and/or acquire
platforms in markets previously difficult to access.
- There is a continuing disconnect between buyers
and sellers in the Marine sector over the pricing of Gulf of Mexico energy-exposed business, with
buyers looking to co-insurance and/or higher retentions as solutions to high relative prices.
outside US peak catastrophe zones have struggled to show much real increase as diversification of exposure
remains a pricing driver.
To read the Willis Re 1st View Renewals Report, please go to: www.willis.com/Documents/Publications/Industries/Reinsurance/1st_View.pdf
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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