Reinsurance rates continued to fall for many buyers at the June and July renewals, according to a report released Tuesday from Willis Re, the reinsurance arm of brokerage Willis Group Holdings P.L.C.
Excess capacity in the market, fueled in part by capital from nontraditional sources, “continues to chase muted demand,” London-based Willis Re said in a statement, as buyers of reinsurance coverage have tended to reap the savings offered by the market but “are not generally seeking to recycle the saved premium spend back into increased reinsurance purchase.”
Continued benign loss experience in the first half of 2014 also served to keep market conditions soft, Willis Re noted.
These conditions are adding to pressure on reinsurance buyers to reduce rates for primary insurance coverage, Willis Re said.
“For primary insurance companies, the ability to recognize primary rate increases while reducing reinsurance cost may be coming to an end,” said Peter Hearn, chairman of Willis Re, in the statement.
“Rate reductions are being seen in most territories on primary insurance classes, although in many cases the reductions are not directly linked to reinsurance savings,” he added.
At reinsurance renewals in June and July, catastrophe-loss-free property business in Florida saw average rate reductions of between 15% and 25%, according to the Willis Re report, while loss-free U.S. (excluding Florida) catastrophe accounts saw rate falls of between 10% and 20% on average.
Willis Re said that for Florida accounts, improved terms and conditions such as extended hours clauses and multiyear agreements were more widely available at June renewals.
Willis Re's “1st View Renewals Report” is available here.