Willis Re, the reinsurance broking arm of Willis Group, has reported in its latest renewals report that 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 the current renewal season.
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.
According to the report, 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.
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 number of territories and product classes, warned that a storm of a different kind is brewing for reinsurers.
Willis Re has said that 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.
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%, being obtained in Florida; and 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.
Peter Hearn, CEO of 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.