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Reinsurance market predicted to remain soft in 2015

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The soft reinsurance market will likely continue into 2015 as mergers and acquisitions remove some overcapacity from the marketplace, but not enough to stem the pricing decline, Fitch Ratings Services Inc. said in a new report.

Leading reinsurers saw modest January price declines for the second year in a row, Fitch said in the “Reinsurers Jostle for Position in Shifting Landscape,” released Wednesday.

“Overall rate reductions for the four major Tier 1 European reinsurers' portfolios were modest at the January renewal, but 2015 was the second consecutive year that each of them incurred an overall decline in price across their portfolios,” the report stated.

The Tier 1 reinsurers include Munich Reinsurance Co., Swiss Re Ltd., Scor S.E. and Hannover Re S.E.

Assuming loss activity remains unchanged, “Fitch Ratings expects further price softening for 2015 renewals.”

Pricing could drop even more in April and beyond, according to the report.

“The higher weighting of nonproportional catastrophe business that is re-priced in April, June and July raises the possibility of steeper price declines than for January's renewals,” Fitch said in its report.

The continued price declines, however, should not materially affect reinsurers.

Despite this being “the second consecutive year of overall price reductions for these reinsurers … we do not expect a material deterioration in their 2015 key performance indicators,” Fitch said in the report.

“Despite the challenging outlook, we expect pricing at the portfolio level to remain adequate for most traditional reinsurers throughout 2015,” said Fitch.