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Member, Beacon International Group, Ltd.
NEW YORK (Reuters)—Reinsurance pricing is on the rise in the United States after years of declines, driven by a spate of natural disasters and changes to a key forecasting platform, reinsurance brokerage Guy Carpenter & Co. L.L.C. said Thursday.
In recent years, reinsurers have not had pricing power, as few major disasters led to excess capacity and heavy competition. Going into 2011, there was little expectation of firmer pricing before next year at the earliest.
But ever since the March 11 earthquake in Japan, there has been a heated debate among analysts and brokers about pricing and whether it would rise given the size of expected insured losses—up to $42 billion by some estimates.
Guy Carpenter said there appears to have been an impact.
"The U.S. market is showing signs of being in transition, with preliminary analysis of renewal pricing roughly flat to up slightly," Guy Carpenter said in a report on April 1 contract renewals.
Besides the Japan earthquake, other factors affecting the market included natural disasters in other parts of the world and changes to the hurricane damage model from catastrophe modeling company Risk Management Solutions Inc.
Prices were generally higher in Japan as well, the brokerage said, although it noted insurers generally honored rate quotes they had offered before the March 11 quake.
XL Group P.L.C., one of the top four Bermudan reinsurers, led S&P insurance shares, gaining 4.2% in afternoon trading.
Japanese reinsurance contracts up for renewal April 1 had “relatively orderly price movements,” but if reinsurers are tested again this year with one more major event, the global market is more likely to change, according to reinsurance broker Willis Re.