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Member, Beacon International Group, Ltd.
Rising reinsurance rates will be limited to areas directly affected by catastrophe losses, according to a report issued Thursday by reinsurance brokerage Guy Carpenter & Co. L.L.C.
The report, “The Route to Profitable Growth,” said that only loss-affected lines and select regions experienced price volatility while the overall reinsurance market remained stable.
“The Jan. 1, 2013, renewal was very orderly, as catastrophes had only local impact,” said Lara Mowery, global head of property specialty for the Marsh & McLennan Cos. Inc. unit, in a statement.
One mitigating factor was an influx of capacity into the reinsurance market, especially capital derived from nontraditional sources such as catastrophe bonds, Ms. Mowery said.
“Even insurers who do not directly utilize nontraditional sources benefit as reinsurers further leverage this capacity,” she said.
The report noted that fully dedicated reinsurance capital rose to record levels during 2012, exceeding $190 billion at the end of the third quarter, which helped reduce the impact of October’s Superstorm Sandy on the U.S. East Coast.
“Sandy’s landfall, combined with historically high crop losses in the United States and other severe weather outbreaks across the globe, resulted in global insured losses exceeding $50 billion in 2012,” the report states. “This was nevertheless significantly less than the $120 billion of insured loss sustained in 2011.”
In fact, the Guy Carpenter Global Property Catastrophe Reinsurance Rate on Line (ROL) Index, which tracks reinsurance prices across the globe, fell marginally at the Jan. 1 renewals, the report noted.
“The sector continues to show strong resilience,” David Flandro, Guy Carpenter’s global head of business intelligence, said in the statement. “Over the last five years, insurers have had to respond to financial crises, falling investment yields and increasing international losses.”