Reinsurers take Defensive Action, with P&C Rates Down by up to 25%
London, UK, 1 July, 2013, Reinsurers are taking robust defensive measures to maintain market positions recently eroded
by new capital markets entrants, according to reinsurance risk advisor and broker Willis Re, a division
of Willis Group Holdings plc (NYSE:WSH).
The Willis Re 1st View 1 July renewals report, entitled Supply Chases Demand, finds that despite the
impact of the US$ 30 billion Superstorm Sandy loss, the key battleground is in U.S. Property
catastrophe where capital markets have been most active so far.
John Cavanagh, Global CEO of Willis Re, said: “Traditional reinsurers’ defensive actions include offering price reductions, larger
line sizes and, in some cases, broadening of cover by offering options such as multi-year agreements,
extended hours clauses and additional reinstatements. Capacity for aggregate cover is also more widely available. As
most programs are well over-placed, buyers are facing the challenge of signing down reinsurers’ shares.”
The offering from collateralized markets has also continued to evolve, offering primary buyers increasingly flexible cover and
minimizing their basis risk.
Peter Hearn, Chairman of Willis Re, commented: “The trend for traditional reinsurers to set up sidecar-type structures,
providing third-party capital access to the risk they are accepting, continues to expand. Similarly, the catastrophe
bond market continues to grow rapidly and is on track to surpass the previous record high
issuance in 2007 of US$ 7.2 billion. With the strong inflow of new funds, the challenge
for Insurance-Linked Securities (ILS) fund managers is how to source enough demand to satisfy investor demand
for ILS products.”
The report finds that this is proving challenging, as growth in the largest catastrophe market, the United
States, remains modest, as does the take up rate of capital market solutions in other markets
– despite the increasing competitiveness of price as compared to traditional reinsurance products.
The softening in U.S. Property catastrophe rates and traditional reinsurers’ desire to maintain their market positions is
spilling over into other classes. The report finds that casualty markets are seeing substantial increases in
capacity across the world and,consequently, prices are softening even though there are concerns about the current
low interest rate environment.
The report also found that:
Rates are down as much as 25 percent on some Florida Property catastrophe accounts
Losses caused by
U.S. tornadoes and European floods during the second quarter will only have a modest impact on
the global reinsurance market. As it stands, it is not easy to see any end to
the continuing softening of the global reinsurance market
With the modest outlook for growth and improvements
in underwriting profitability, many reinsurers are re-examining their capital management strategies in an effort to improve
their overall results
The changing dynamics in the distribution of Specialty and large commercial risks continued
to evolve actively in the second quarter. A number of new initiatives were launched, the majority
of which are aimed at direct and facultative markets
Please click here to view the report.
About Willis Re
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Analytics capabilities, which it combines with its Reinsurance expertise in a seamless, integrated offering that can
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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 can help clients make better reinsurance
decisions and negotiate optimum terms. For more information, visit www.willisre.com.
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roots dating to 1828, Willis operates today on every continent with more than 17,000 employees in
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