Global reinsurance firms Munich Re, Swiss Re and Hannover Re have started contract talks for 2014 with insurance firms, amid growing competition from pension funds, due to increased capital investment.
The steady growth of investment by pension funds to seek higher yields have forced reinsurance firms not to increase the cost of reinsurance prices, which subsequently affects their balance-sheet amid growing natural disasters, Reuters reported.
In order to cover costs paid as compensation in claims and boost profits, the reinsurers want to increase prices, but a supply of insurance from alternative sources such as pension funds acts as obstacles to those efforts.
The reinsurance sector has faced approximately €4.5bn ($6.2bn) of claims in Germany alone, according to a trade body’s report.
Marsh managing director Georg Braeuchle was quoted by the news agency as saying, "We are currently seeing only moderate price increases in the property business, which certainly is an indirect effect of the supply of new risk capital flowing into the market."
"There are certainly insurers who have their backs against the wall and who are demanding much higher premiums, but they will have to give away those risks because other market players are ready to write the business on the same terms or are willing to accept a lower price increase," Braeuchle added.