Reinsurance rates uncertain as more capital offsets cats: Willis Re
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Some reinsurers are positioning themselves for possible rate hikes as a result of an “exceptional” run of natural catastrophes, according to a report issued Thursday by Willis Group Holdings P.L.C.'s Willis Re unit.
The Willis Re 1st View Renewals Report for June and July said that catastrophes in the past 16 months have cost reinsurers about $48 billion and insurers $86 billion.
However, the report also says that the losses are being offset by a variety of factors, including a scaling back of share buybacks, and the entry of $1.2 billion in new capital “either through sidecars or fresh equity, as some reinsurers start to position themselves for a possible market turn.”
Fresh funding
The report also notes that “a number of collateralized capacity providers whose existing capital has been called following the first-quarter losses, have been able to raise fresh funds,” according to the London-based Willis Re's analysis.
“Given all the variations in loss experience, model change, exposure change, structure change, capacity demand and geographical scope, it is not easy to generalize about rate changes,” Willis Re Chairman Peter Hearn wrote in the report. “The reinsurance market as a whole has reacted reasonably logically with a differentiated approach driven on a case-by-case basis.”
Fragmentation growing
“The reinsurance market remains in a state of uncertainty regarding its short-term future direction, but what is clear is that any turn in the market pricing cycle is unlikely to follow historic patterns,” Mr. Hearn wrote.
“More sophisticated capital management techniques and greater transparency over profitable market niches are driving fragmentation of the cycle into territory- and class-specific cycles.”
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