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Reinsurers expect challenging year-end renewal season because of soft pricing

Reinsurers expect challenging year-end renewal season because of soft pricing

MONTE CARLO, Monaco — U.S. property catastrophe reinsurance rates may have “bottomed out,” but the year-end renewal season will still be challenging for reinsurers, executives at some of the world's largest reinsurers said at various briefings at the Rendez-vous de Septembre in Monte Carlo, Monaco.

Discussing trends in the market at the meeting, which is the traditional start of the year-end renewal season, executives said low catastrophe losses, increased capacity from the alternative market and other factors are keeping a cap on rates in traditional lines.

In an effort to expand their business, several executives said they will concentrate on new products and expanding their business in other areas of reinsurance.

Rates for catastrophe reinsurance in North America likely have “bottomed out” and will remain stable at upcoming renewals, said Jürgen Gräber, a member of the executive board responsible for global reinsurance and the coordination of worldwide property/casualty reinsurance at Hannover Re S.E.

During a briefing Monday by German reinsurer, Mr. Gräber said catastrophe rates likely also will be flat in Europe, Japan, Australia and New Zealand.

The abundant capacity that has entered the market from nontraditional sources, such as hedge funds and pension funds, through catastrophe bonds has depressed rates, but the rates of return to investors on those bonds are now approaching the minimum of what investors expect, said Michel M. Liès, group CEO of Swiss Re Ltd.

As a result, declines in natural catastrophe rates is set to slow, he said during a briefing Monday.

Conditions in the global insurance and reinsurance markets remain challenging, Torsten Jeworrek, CEO of reinsurance at Munich Reinsurance Co., said Sunday.

It is hard to say whether the reinsurance cycle has reached its bottom, he said, but he also said the reserve releases that have been used by some reinsurers to bolster results “cannot go on forever.”

There are headwinds facing the reinsurance market, said Denis Kessler, CEO of Scor S.E., including macroeconomic uncertainty, regulatory changes, increased capacity and changing buying patterns where some cedents centralize the purchase of reinsurance and sometimes increase their retentions.

But there are opportunities for reinsurers to develop new coverages for risks such as cyber liability, said Victor Peignet, CEO of Scor Global P&C S.E., the reinsurer's property/casualty unit.

Munich Re also sees opportunities to develop new products, Mr. Jeworrek said, particularly in the areas of cyber liability, energy, supply chain, non-physical-damage business interruption and reputational risk.

Swiss Re is looking for more opportunities in the casualty sector, said Mr. Liès.

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