Reinsurance rates soften despite large losses: Analysis
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Despite nearly $9 billion in insured losses from the earthquake in Chile and storms in Australia this year, there has been little overall change in global reinsurance pricing, which softened further during recent renewals, Willis Re said in a Thursday report.
The report, “Running on Empty,” says there have been no general moves to increase reinsurance prices despite significant first-quarter losses.
Insured losses from the quake in Chile have been estimated as high as $8 billion, while the Australian storms have been projected to cost insurers more than $800 million.
Prices are softening despite the fact that quake and storm losses, as well as lesser catastrophe losses, are likely to be greater than the entire catastrophe excess-of-loss premiums written outside the United States this year, the Willis Re report suggests.
It would take a major catastrophe that removes a “considerable” portion of the market’s excess capacity to halt the trend, according to the report.
On a regional level, however, Chilean-specific reinsurance renewals have jumped 40% to 70%, according to the report by the London-based reinsurance broking arm of Willis Group Holdings P.L.C.
The report says the global reinsurance market has experienced a gradual decline in pricing, with only a limited number of loss-driven classes and territories showing pricing stability or upward pricing pressure.
Peter Hearn, CEO of Willis Re, said there is a “growing nervousness” in the reinsurance market. “There is a concern that the longer the wait for an upturn in the reinsurance market, the more abrupt it will be once it eventually arrives,” he said in a statement.
The report is available at www.willis.com.
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