BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.
To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.
To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.
MONTE CARLO, Monaco —Rates for property catastrophe reinsurance are likely to fall at the January renewals, but there are signs that the bottom of the pricing cycle may be approaching.
While an absence of large catastrophe losses this year means rates are likely to continue declining, the double-digit pace of those declines is slowing to single digits at best, experts said during the Rendez-Vous de Septembre reinsurance meeting in Monte Carlo, Monaco, earlier this month.
At the midyear renewals, sources said, some programs were not fully placed and were repriced at higher rates.
“I think there's continued pricing pressure in the industry, muted by a strong consensus that the downward slope is beginning to flatten out. We are seeing some programs in various lines just barely clear or fall short of the required capacity,” said Jay Nichols, CEO of Axis Reinsurance Co. in Zurich. “From our vantage point, we certainly see a declining slope when it comes to pricing decreases.”
“Do we expect to see the level of rate reductions that we witnessed for the prior two January renewals seasons in the U.S. property catastrophe market? The answer is: No, we don't,” said James Kent, co-president of Willis Re Inc., and president of Willis Re North America, units of Willis Group Holdings P.L.C.
He said buyers are aware that the average midteen percentage declines at the midyear renewals likely would not be possible early next year since reinsurers likely will walk away from some low-priced business.
The pace of property catastrophe rate declines slowed at midyear, the first time in nearly three years, said David Flandro, global head of analytics at JLT Re in New York, a unit of London-based Jardine Lloyd Thompson P.L.C.
“We saw rates fall by 8.2% on June 1 on average,” he said. “The trajectory is still negative, but the direction of negativity is less than it was before.”
“If you look at the trajectory of what happened on June 1, if nothing happens between June 1 and Jan. 1, there's not much reason for Jan. 1 to be much different,” Mr. Flandro said.
The midyear rate reduction slowdown, Florida wind rates being already at the very lowest they can be, a slowdown in nontraditional capital entering the market from sources such as pension funds, and the fact that more mergers and acquisitions likely will remove some capacity from the marketplace, will combine to stabilize prices.
“We may be starting to reach an inflection point,” Mr. Flandro said.
Slower price increases look to continue “and eventually will stabilize in 2016” if there are no large catastrophe losses, said Matthias Weber, group chief underwriting officer at Swiss Re Ltd.
He said this stabilization would be caused in part by the new capital slowdown and diminishing reserves that reinsurers can release to bolster results.
Denis Kessler, chairman and CEO of Paris-based Scor S.E., described the current market dynamic as a “soft landing of the soft market.”
The world's largest reinsurers are “of a consensus” that rates cannot fall much further “without cutting (reinsurers') throats,” said Victor Peignet, CEO of Scor Global P&C in Paris.
“In a softer market, like we're in now, there may be fewer times we're going to be able to get the price we want for the risk that we like, and therefore we'll have to take a pass (on underwriting the business), and we're willing to shrink the market,” said Tony Kuczinski, president and CEO of Munich Reinsurance America Inc.
“We are seeing a floor start to emerge, much like in the late 1990s,” said Greg Hendrick, CEO of reinsurance at XL Catlin Group P.L.C., “driven by the realization that (in many cases) the price is not commensurate with the risk in short-tail lines.”
Midyear rate declines were less than previous renewals, said Ulrich Wallin, CEO of Hannover Re S.E.
In some cases, he said, programs could not be finished at midyear — particularly in Florida where demand increased for commercial reinsurance coverage.
While it's still “a buyer's market,” Mr. Wallin said that there's not much room for property catastrophe rates to fall further for the Jan. 1 renewals and that Hannover Re also expects the market to stabilize during 2016.
While some buyers and their brokers have sought to broaden terms and conditions, such as multiyear deals or including terrorism coverage, reinsurers have been treating such requests on a client-by-client basis, Mr. Hendrick said.
Inga Beale, CEO of Lloyd's of London, said broader terms and conditions is a challenge for the market and Lloyd's is closely was monitoring the situation to ensure that underwriters do not run into trouble.
Rates for casualty reinsurance continue to soften, but they are less than declines in property catastrophe coverage.