Willis Re: Chile Earthquake and Australia Storm Losses Have Little Impact on Property Catastrophe Pricing
Majority of Reinsurance Market Remains Soft at
June 1 and July 1 Renewals
London, UK, June 30, 2010 - Major losses from the Chile earthquake and storms in Australia in
the first quarter of 2010 have had little impact on pricing in the global reinsurance market,
which continued to soften this renewal season. The exception was on Chilean-specific renewals, which have seen
rate increases of between 40 and 70 percent. This assessment of the state of the marketplace
comes from the latest renewals report from Willis Re, the reinsurance broking arm of Willis Group
Holdings (NYSE: WSH), the global insurance broker.
Titled "Running on Empty," the Willis Re 1st View report for the June 1 and July 1
renewals found that, in Property Catastrophe lines, there have been no general market moves to increase
prices, despite the fact that the Chile earthquake and Australia storm catastrophe losses, together with some
other minor catastrophe losses, are probably sufficient to erode the entire 2010 Catastrophe Excess of Loss
premium base outside of the US.
The report said that the global reinsurance market has experienced a continued gradual decline in pricing, with
only a handful of loss-driven classes and territories showing any pricing stability or upward pricing pressure.
Barring any major loss event which removes a considerable portion of the excess capital, there is
unlikely to be any rating upturn in the near future, according to the reinsurance broker.
However, with the UK Met office predicting an "exceptionally active" hurricane season from June to November in
the Atlantic region, Willis Re's report, which tracks reinsurance rate movements across numerous territories and product
classes, warned that a storm of a different kind is brewing for reinsurers.
A combination of excess capital, stable investment returns and limited growth prospects continues to obscure the potential
impact that prolonged soft pricing could have on the global reinsurance market in the event of
a major hurricane or a similar catastrophe, said Willis Re.
Commenting on a "growing nervousness" in the market, Peter Hearn, CEO, Willis Re, said, "There is a
concern that the longer the wait for any upturn in the reinsurance market, the more abrupt
it will be once it eventually arrives."
Other renewal trends highlighted in the report are:
- Casualty pricing remains generally soft and rates have continued to decline, though with some territorial variability.
- Competition remains fierce, with substantial capacity chasing premium volume in many lines of business, but most
particularly in areas of perceived diversifying risk, such as the Middle East.
- US property
renewals performed as expected, with significant rate reductions, as high as 25 percent, being obtained in
- In recognition of excess capital, some companies are redistributing their capital through share buy
backs and special dividends, but major M&A activity remains muted.
- Reinsurance capacity from Capital markets
is gradually increasing, and the products being structured are increasingly attractive for issuers, both in terms
of coverage and pricing.
Click here to read the full Willis Re 1st View Renewals Report.
One of the world's leading reinsurance brokers, Willis Re is known for its world-class, analytics capabilities, which
it combines with its Capital Markets and Reinsurance expertise in a seamless, integrated offering that helps
clients increase the value of their businesses. Willis Re serves the risk management and risk transfer
needs of a diverse, global client base that includes all of the world's top insurance and
reinsurance carriers as well as national catastrophe schemes in many countries around the world. The broker's
global team of experts offers services and advice that help clients make better reinsurance decisions, access
worldwide capital markets and negotiate optimum terms.
Willis Group Holdings plc is a leading global insurance broker. Through its subsidiaries, Willis develops and delivers
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 17,000 employees serving clients in virtually every part of the
world. Additional information on Willis may be found at www.willis.com.
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