Willis Re 1st View: Rates soften across all lines, with reductions of up to
London, UK, 1 April, 2014, Reinsurance pricing continued to fall almost across the
board at the 1 April 2014 renewals, according to the 1st View renewals report from
Willis Re, the reinsurance division of risk advisor, insurance and reinsurance broker
Willis Group Holdings plc (NYSE:WSH).
Trends observed during the 1 January 2014 renewals continued and showed clear
signs of acceleration. Positive 2013 results for traditional reinsurers and a seemingly
unabated supply of capital from third party investors have added further to the
oversupply of reinsurance capacity chasing muted demand.
John Cavanagh, CEO of Willis Re, commented: “The 1 April renewals have seen a
softening of rates across nearly all classes and geographies which, in turn, has
allowed buyers to achieve substantial savings in the cost of their reinsurance
protections. Some buyers took the opportunity to buy more cover and some renewals
saw an expansion in terms and conditions. The overriding target for most buyers,
however, was to achieve price reductions or an increase in ceding commissions.
Restructuring and consolidation of covers by some of the larger buyers continues to
be a trend along with M&A consolidation causing further compression in price in favor
of the buyer.”
Many primary insurance company buyers, most noticeably international and regional
U.S. companies, continue to remain cautious in their use of insurance-linked
securities (ILS) and collateralized markets.
Major traditional reinsurers have worked hard to optimize the use of their client
relationships, capacity and technical underwriting capability to protect and, in some
cases, increase their shares to help withstand the challenges of competing with the
ILS and collateralized markets.
These reinsurers have also stepped up efforts to manage their capital through
increased share buy backs, special dividends and other techniques. In spite of the
softening rate outlook, stock valuations of quoted companies remain attractively high.
In fact, a number of companies are taking advantage through public share offerings
to provide existing investors with an exit strategy.
Peter Hearn, Chairman of Willis Re, said: “The current reinsurance market clearly
favors the buyer. The cost of reinsurance is falling much faster than original rates in
many classes and territories. Comfortable though this situation may be for many
buyers, the nagging concern remains as to timing. When will a lower cost of
reinsurance feed through in lower original rates and put primary companies’ margins
back under pressure?”
Other points covered in the report include:
In addition to the primary reinsurance market, the retrocession market has
been the key area of activity for ILS and collateralized markets
Capital markets investors are now entering non-catastrophe markets, usually
closely aligned to traditional reinsurers with technical underwriting skills
U.S. nationwide property rates down by up to 20% on non-loss affected lines
Indian property rates down by up to 20% on non-loss affected lines
Japan Earthquake down by up to 17.5% on non-loss affected lines
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 Reinsurance expertise in a
seamless, integrated offering that can help 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
can help clients make better reinsurance decisions and negotiate optimum terms. For
more information, visit www.willisre.com.
Willis Group Holdings plc is a leading global risk advisor, insurance and reinsurance
broker. With roots dating to 1828, Willis operates today on every continent with more
than 18,000 employees in over 400 offices. Willis offers its clients superior expertise,
teamwork, innovation and market-leading products and professional services in risk
management and transfer. Our experts rank among the world’s leading authorities on
analytics, modeling and mitigation strategies at the intersection of global commerce
and extreme events. Find more information at our website, www.willis.com, our
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