In a report from Baden-Baden, Willis Re, the reinsurance arm of Willis Group Holdings plc, notes that “increased capacity, competition and changing market dynamics have created a buyer’s market for European cedants. These market conditions, coupled with changing reinsurance buying patterns, are driving reinsurers to offer more flexibility and tailored solutions to European clients.”
Tony Melia, CEO of Willis Re International, said: “With large parts of Europe so far experiencing another year of exceptionally low natural peril loss activity, reinsurers are facing significant rating pressure on catastrophe programs in loss free territories on the back of the excellent 2012 and 2013 results.
“Absent of a major loss event, we expect risk adjusted reductions of 5 percent to 10 percent for straight forward loss free property catastrophe business with the reductions on individual programs being influenced by program history and perceived profitability.”
Reinsurers are also reviewing their view of risk on loss affected programs, which together with the history of the placement and individual loss experience will determine the pricing level at renewal.
Melia added: “Even loss affected programs will benefit from the current soft market conditions and will receive more modest adjustments than during previous pricing cycles. Above all though, the current market environment enables cedants to consider buying the reinsurance that they want, in addition to what they need.
“Cedants should take advantage of reinsurers’ flexibility and their willingness to provide company wide solutions to protect against earnings volatility alongside capital protections. These, together with the use of reinsurance structures to consolidate risk appetites, are the underlying drivers of changing reinsurance strategies in the industry.”
Source: Willis Re