Willis Re: Lower Loss Activity and Market Support for Improvement in Rating Levels Boosts Reinsurers’ start to
London, UK, April 02, 2012 – Reinsurers have seen more positive results in the first quarter of
2012 than in the previous two years according to Willis Re, the reinsurance broking arm of
Willis Group Holdings (NYSE: WSH). However, lower levels of loss activity in both the US and
International markets, and a gradual improvement in rating levels seen in the primary market, have been
overshadowed by reinsurers’ disappointing 2011 result.
The Willis Re 1st View April Renewals Report, entitled “Measured Response” found that despite the market showing
signs of positive development, most reinsurers remain hesitant to increase their portfolios, preferring to focus on
managing underwriting volatility and conserving capital whilst waiting for signs of further improvement.
The report notes that some primary buyers are reluctant to manage increased reinsurance costs through reduction in
purchases and are restructuring their programs to maintain retention levels, although this trend is not being
seen in the larger U.S. primary companies, who are seeing a continuing increase in their property
Peter Hearn, Chairman of Willis Re, commented:
“Reinsurers remain focused. They are taking a highly segmented and increasingly disciplined approach to terms and conditions
and are not seeking to apply blanket rate increases. In turn, this is leading to wider
variations in rate movement by territory and class.”
Other findings covered in the report include:
- The Thailand floods have caused reinsurers to seek greater transparency and control particularly over contingent business interruption.
It may take a number of years until final numbers are determined, but the technical and
psychological impact of this loss on the global insurance industry will far outweigh the ultimate financial
loss for years to come.
- Reinsurers are applying tighter limits on natural perils, including lower event
limits on pro rata treaties.
- In an improving rating environment, new capital continues to be drawn
to the global insurance industry, but on a different basis than previously. The traditional model of
starting up companies post-major events appears to be falling out of favor. Investors are now concentrating
on accessing the purest forms of (re)insurance risks through specialist funds and other structures.
- Mergers and
acquisitions remain active, notwithstanding the uncertain economic backdrop and the challenge of low valuations which remains
a hurdle for deal completion.
In the report’s opening letter, Hearn comments on the conclusions of the report and their impact on
reinsurers. He writes:
“Fortunately for its customers, the global reinsurance industry is largely reacting in a measured and logical fashion.
Falling investment income, allied with increased loss trends on long-tail business, still remain key to a
broad and more defined future market hardening in the absence of a major catastrophic loss.”
Click here to read the full Willis Re 1st View report.
About Willis Re
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. For more information, visit www.willisre.com
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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