Reinsurance renewal rates reflect continued softening
Early predictions that January 1, 2011 reinsurance renewal rates were likely to fall have been proven correct, says Guy Carpenter.
The Guy Carpenter Global Property Catastrophe Rate Line (ROL) Index lost 7.5 percent – the second consecutive annual decline. Contributing to this move has been a combination of factors, including moderate loss activity and abundant levels of industry surplus.
Guy Carpenter said the decline in rates on line at January 1, 2011 takes place following a year that began with significant catastrophe activity. Losses in the first half of the year were well above average and included Windstorm Xynthia, the Deepwater Horizon oil rig loss and the Chile earthquake. However, despite the New Zealand earthquake in the second half, the year finished with relatively low insured catastrophe losses – owing in large part to an unexpectedly low-loss hurricane season. “Subdued losses, combined with unrealized investment gains, led to record levels of capital, which in turn drove reinsurance pricing lower at the renewal. Structures have not changed significantly: Cedents are buying similar amounts of cover to last year, with purchasing appetite helped by attractive pricing,” the Index said.
David Flandro, Head of Global Business Intelligence, Guy Carpenter & Company said: “While current market conditions show no immediate signs of reversing, we see an increasing number of latent factors which – alone or in combination – could at some point precipitate a meaningful change in the market’s direction. Depending on loss experience, these factors could begin to coalesce around renewals later in 2011.”
