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Reinsurance pricing stabilizes at June, July renewals

Posted On: Jul. 1, 2015 12:00 AM CST

Reinsurance pricing showed signs of stabilizing during June 1 and July 1 renewals on more balanced supply and demand, Willis Group Holdings P.L.C. said Wednesday in a new report.

The report, “1st View: Soft Market Slowdown in Pockets,” shows that while competition remains intense for nonpeak areas where traditional reinsurers dominate the market, signs of pricing stabilization are starting to emerge in peak property catastrophe zones as supply and demand begin to equalize, Willis said in a statement.

“Despite pricing remaining under intense competition in nonpeak areas where traditional reinsurers still dominate, after a relentless period of rate reductions, early signs of pricing stabilization are starting to emerge in peak property catastrophe zones,” said the report.

A slowing of alternative capital capacity coupled with demand in Florida has worked to buoy pricing.

“The swell in capacity from collateralized reinsurance markets, which has recently played a major role in driving pricing in the peak zones, appears to have abated. A number of these markets have shown pricing discipline by cutting the capacity they are prepared to offer as the market has continued to soften,” said the report. “This, in turn, has had a knock-on effect to traditional reinsurers, who in recent years have relied on collateralized reinsurance to provide their retrocession capacity.”

“The notable increase in demand for Floridian catastrophe capacity has also been a factor,” the report added.

“The June 1 and July 1 2015 renewal season offers reinsurers some hope,” John Cavanagh, global CEO of Willis Re, said in the report. “With the North Atlantic hurricane season now underway, even if the predicted low level of hurricane activity is realized, the outlook for 2016 might not be quite as bleak as may have been inferred from the January and April 2015 renewals,”