Cedants a worry, but business good for some

The continued soft market with clients seeking further rates cuts is the biggest challenge and concern of attendees at the reinsurance conference in Baden-Baden this year—with many also baffled and worried by the changes cedants are implementing in their reinsurance programmes.

That was the conclusion of an online pre-Baden-Baden survey conducted by this publication. Some 55 percent of respondents said further pressure on already soft rates is their biggest concern while 20 percent said consolidation and the resultant changes to the reinsurance landscape is their biggest worry.

Another 14 percent said their biggest concern was cedants restructuring their programmes and buying less coverage. A number highlighted the fact that cedants are changing their strategies and also stressed the challenge this is causing brokers operating in this environment.

“It may appear counterintuitive to purchase less reinsurance in a soft market but that is what we are seeing,” said one respondent.

“The best defence against this for the smart broker is to demonstrate the ability to achieve very cost-effective structures, which has been mainly through the combining of different silos into group or collective placements.”

Another explained that these pressures also pose a great dilemma for reinsurers seeking to draw a line in the sand on rate decreases.

“The larger the reinsurance players, the greater the dilemma: keep a foot in the door at loss-making terms or swallow your pride and pull out of programmes,” said one.

Not all respondents named these bigger challenges. A small percentage said the influx of alternative capacity and the way this is changing the industry was their biggest worry. And, perhaps surprisingly, 9 percent said they had almost no concerns.

“Business is OK for us. We are growing and finding that cedants want an innovative, alternative solution,” one said.

What is your biggest challenge/concern this renewals season?