The briefing, available at www.GCCapitalIdeas.com, finds that stabilization in the global financial markets has contributed to the steadying of reinsurance rates, with capital deterioration slowing markedly from the rapid pace witnessed in 2008. As a result, reinsurance supply remains generally adequate to meet demand.
In addition to addressing developments in the U.S. at the July 1, 2009 renewal, the briefing
examines Latin American and marine mid-year renewals.
UNITED STATES
• Firm order terms (FOTs) for higher layers grew between 11 percent and 14 percent relative to July 1, 2008 FOTs, while slightly larger increases – 14 percent to 16 percent – were realized at lower layers.
• Average quotes ranged from -25 percent to 15 percent, based on program-specific factors. FOTs were 89 percent of the maximum quote and 117 percent of the minimum. Despite the considerable gap between maximum and minimum quotes, FOTs came in at 96 percent of the average quote.
• In the Northeast, FOTs for both higher and lower layers were up between 5 percent and 10 percent year-over-year.
LATIN AMERICA
• Though preliminary data varied by country, upward pressure on pricing was offset by supply and local market competition, which keep reinsurance rate increases contained.
• Mexico sustained price increases of between 2.5 percent to 10 percent, on average, for earthquake and windstorm catastrophe excess of loss (XOL) programs. Central American earthquake and windstorm pricing was in roughly the same range.
Reinsurance renewal rates in Chile and the Caribbean (and some multi-territory programs) stretched higher.
• Widespread price hikes were prevented by a competitive primary market, reinsurance broker competitive forces, and the fact that capacity was broadly unchanged from July 1, 2008.
• Price increases for risk XOL programs in Mexico and Central America were relatively modest – 2.5 percent to 5 percent, on average.
MARINE
• The July 1, 2009 marine reinsurance renewal remained consistent with the January 1, 2009 renewal, with rates increasing by 5 percent to 10 percent for XOL programs, based on loss history and catastrophe exposure.
• Capacity has remained adequate, despite the loss of capital sustained from late 2008 through the first two quarters of 2009.
• Capacity was limited for offshore energy programs, for Gulf of Mexico windstorm in particular. As pricing and attachment levels increased, terms and conditions also tightened. Moreover, a number of insureds chose to self-insure Gulf of Mexico assets, leading to a dramatic drop in aggregate risk limits.
“Though the replenishing of balance sheets remains slow, the industry has, for the most part,
stemmed its capital losses," says Lara Mowery, Global Head of Property Specialty Practice, Guy Carpenter. "It is fair to say that the property-catastrophe reinsurance market remains finely balanced, with capacity across most lines remaining adequate to meet demand. Price increases have been steadily in the 10 percent to 15 percent range.”
“With four major renewal periods having been completed in this calendar year, there is a general
sense of calm in the reinsurance markets, aided by stabilization in the global financial markets," says Chris Klein, Global Head of Business Intelligence, Guy Carpenter. "A few notable hotspots remain, however, based on region- or program-specific factors.”