Two new reports deepened the gloomy outlook for global reinsurers Monday, with fresh evidence of weak pricing and little hope for a turnaround for the sector in the near future.
Reinsurers are mired in a prolonged slump as an excess of capital and a lack of significant natural disasters combine to push rates lower amid heavy competition. Prices for 2011 risk coverage written in recent weeks are down 5 percent to 10 percent on last year.
Reinsurance broker Towers Watson said Monday it found an “orderly rate softening” for Jan. 1 renewals, pointing to many of the same factors its competitors have in recent weeks.
The brokerage said it expected stable capacity would outpace flat-to-lower demand for the rest of the year. Some insurers are likely to exhibit a decreased appetite for reinsurance this year and to keep more risk on their books, Towers Watson said.
Also on Monday, insurance ratings agency A.M. Best released a 2011 outlook for the reinsurance business. The agency predicted a difficult earnings year and potential pressure on margins from lower reserve releases and higher catastrophe losses.
European reinsurers were broadly lower Monday, with the world’s two biggest players, Munich Re and Swiss Re , closing down 1.9 percent and 1.7 percent, respectively.
No. 3 reinsurer Hannover Re, whose shares have risen strongly in recent weeks, closed down 4.3 percent, after it bumped up its expected loss from last September’s New Zealand earthquake by nearly 25 million euros, to about 113 million euros.
France’s Scor fell 3.9 percent.
But shares in Bermuda-based reinsurers were more mixed. ACE Ltd fell 0.8 percent and XL Group dipped 0.2 percent. But PartnerRe and Everest Re both rose 0.2 percent in midday trading.
(Reporting by Ben Berkowitz, additional reporting by Jonathan Gould in Frankfurt; Editing by Phil Berlowitz)