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Guy Carpenter: Reinsurance Renewals Decline for Second Consecutive Year

Posted on 30 Dec 2010

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For the second consecutive year, global reinsurance property catastrophe rates on line for most lines of business declined at the January 1, 2011 renewals, according to a report published today by Guy Carpenter & Company, LLC, the leading global risk and reinsurance specialist and a member of Marsh & McLennan Companies.

The Guy Carpenter Global Property Catastrophe Rate on Line Index dropped 7.5 percent in 2010, as moderate loss activity, high levels of industry surplus and other factors contributed to the decrease. Structures did not change significantly, with cedents buying amounts of cover comparable to last year.

The report, titled Points of Inflection: Positioning for Change in a Challenging Market, features Guy Carpenter’s comprehensive 2011 reinsurance industry outlook and identifies several emerging drivers of change that have the potential to turn around current soft market conditions in the year ahead.

Key reinsurance industry issues and trends examined in the report include:

Guy Carpenter’s exhaustive sector-by-sector and regional review of renewal rates indicates, with few exceptions, further softening in the market.

Guy Carpenter estimates dedicated reinsurance sector capital to be USD19 billion (11 percent) in excess of historical levels given risks currently assumed, with a defensible range of between USD14 billion (8 percent) and USD26 billion (15 percent).

The Solvency II regulatory capital regime has profound impact on the industry far beyond the European jurisdiction. Re/insurers worldwide should be prepared to identify, understand and manage these risks associated with Solvency II changes.

Bill Kennedy, CFA, CEO of Global Analytics and Advisory, Guy Carpenter & Company, LLC, said: “We expect 2011 to be a challenging year in terms of global macroeconomic issues and insurance underwriting. It is also likely to be a year of opportunity. Insurers armed with the best information, insights and innovative solutions will be best positioned to take advantage of the changing environment. Guy Carpenter is committed to helping its clients successfully navigate this challenging market environment.”

David Flandro, Head of Global Business Intelligence, Guy Carpenter & Company, LLC, commented: “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.”