Reinsurance rates for the property/casualty industry are falling or flat, except for insurers with major property wind exposure along the Gulf and East Coasts, where rates are still rising. That is one key finding from an annual international reinsurance review issued by Willis Group Holdings, a global insurance broker. The reinsurance review of the marketplace for the Jan. 1, 2007, renewals is titled “The Tipping Point?”
According to the report, reinsurance rates for both P/C exposures around the globe are generally flat or falling modestly. In Europe (with the exception of wind exposed Northern European multi-territory covers where rates are firm), Asia, Australia, Latin America and those areas and classes of business of the United States not prone to natural catastrophes, rates are flat or have fallen by 5 percent to 10 percent.
“The twin blessings of fewer losses and more capital combine to make the 2007 reinsurance renewal season, for most insurers, less costly. Reinsurers are rebuilding both their balance sheets and their commercial confidence while, at the same time, insurers are creating and implementing sophisticated enterprise risk management programs,” wrote Peter Hearn, Willis Re CEO.
According to Willis, wind-exposed property business on the East Coast or Gulf Coast is experiencing rate increases of around 40 percent, as reinsurers have sought to bring January renewals of nationwide and/or critical catastrophe accounts in line with the mid-year 2006 pricing levels.
The U.S. coastal rates are also rising due to the “perception of increased volatility” contained in the latest property catastrophe models and the continuing efforts by reinsurers to recoup losses from the catastrophes of 2005.
The Willis review contends that there is not enough retrocession capacity for reinsurers to spread their catastrophe risks. Reinsurers, as a consequence, require greater returns to compensate for this increased retained exposure, the report added.