A new report from Willis Re, entitled “Conserving Capital – 1st View,” concludes that the “majority of reinsurers reported relatively positive results and some underwriting profit despite poor investment returns in 2008, outperforming the wider financial services community. As a result, the reinsurance market stands out as the only capital market operating smoothly, with buyers able to access large quantities of contingent capital.”
“There is no doubt that reinsurers are being squeezed by investment performance, deteriorating Hurricane Ike losses and a growing need to increase prior year casualty reserves,” explained Willis Re CEO Peter C. Hearn. “These pressures are also compounded by the extreme volatility of currency rates of exchange. However, despite these challenges, the increased demand for reinsurance which started at January 1 renewals, continues strongly to April 1 renewals and shows no signs of diminishing.”
Among the other key findings of the report were listed as follows:
— Access to fresh capital remains limited mainly to Lloyd’s, which has outperformed in previous months and has access to a wider range of investors, including capital from private investors.
–The Catastrophe Bond Market, which stalled following the collapse of Lehman Brothers, has adjusted its product and reopened.
–Buyers are seeking diversification in their reinsurer counterparties, but capacity and price continue to play key roles in buyer decision-making.
— In some niche markets, where exposures are particularly challenging, such as Gulf of Mexico, there are signs that some clients are opting to drop cover, but as of January 1, a reasonable balance between affordability and coverage seems to be prevailing in the main.
To view the report, which is issued three times a year, in full go to: http://www.willis.com/Documents/Publications/Industries/Reinsurance/1st_View_April_2009.pdf
Source: Willis Group Holdings – www.willis.com