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LONDON—Lower losses and gradually rising prices are buoying the reinsurance sector, Willis Re, the reinsurance broking arm of London-based Willis Group Holdings P.L.C., said Monday in a report.
The Willis Re “1st View” April renewals report notes that the positive results in the first quarter of this year are a marked contrast to last year.
“Fortunately, despite continuing difficulties in global investment markets and poor 2011 underwriting results, the capital base of the global reinsurance industry is largely unchanged from 12 months ago—an extraordinary testament to the industry's financial capability to absorb more than $100 billion of insured losses in 2011,” Willis Re Chairman Peter C. Hearn said in a statement.
Mr. Hearn said last year's extended flooding in Thailand will alter how reinsurers model supply chain risks.
“Arising from a largely ignored catastrophe exposure, the magnitude of the loss came as a surprise to most,” he said. “At the same time, it undermined the basic concept of geographic diversification in writing natural catastrophe perils. Reinsurers, as a result, are seeking greater transparency and control particularly over contingent business interruption exposures and are acquiring greater emphasis on all other areas of unmodeled risk.”
While overall losses from the Thai flooding has yet to be finalized, “the technical and psychological impact of this loss on the global insurance industry will far outweigh the ultimate financial loss for years to come,” he said in the statement.
While last year's catastrophes have not led to major changes in the availability of reinsurance in the United States, it will affect pricing, Willis Re said in the analysis.
“Reinsurers are taking a highly segmented and increasingly disciplined approach to terms and conditions and are not seeking to apply blanket rate increases,” Mr. Hearn said. “In turn, this is leading to wider variations in rate movement by territory and class.”