6 January 2017Insurance

Reductions moderate but softening continued in year-end renewals

The decline in reinsurance pricing moderated at the January 1, 2017 renewal across most classes of business and geographies, as compared to the past three renewal seasons, according to an annual renewals report by Guy Carpenter.

The report also revealed that, after remaining fairly stable in 2015, dedicated reinsurance capital increased by 5 percent from January 1, 2016 to January 1, 2017 – as calculated by Guy Carpenter and AM Best – while so-called convergence capital increased by 10 percent.

The Guy Carpenter Global Property Catastrophe Rate-on-Line index, which tracks property-catastrophe pricing, indicated that rates fell 3.7 percent at January 1, as compared to close to 9 percent a year ago.

The ILS space, in contrast, saw dramatic movement in pricing during the fourth quarter with decreases as high as 30 percent. The report noted that while catastrophe bond issuance in the first quarter of 2016 made it the most active first quarter in the market’s history, second quarter catastrophe bond issuance fell to its lowest quarterly level since 2011. “In response to this diminished pipeline, catastrophe bond providers responded with greater flexibility in coverage and significant decreases in price,” the report said.

The report stressed that, while it is too early to judge the broader impact of these changes, the last round of market-wide reinsurance price decreases were triggered in part by catastrophe bond competition.

It added: “As the reinsurance sector continues to be flush with capital and price points are very attractive, product innovation and coverage customization remain a key focus.

“Continued exploration in the reinsurance space paved the way for many new advances, including expansion of solutions for historically difficult and under (re)insured risks such as flood. As risk from increasingly complex sources including climate change, cyberspace and nascent technologies continue to expand, this focus on broadening solutions will translate into ongoing positive market evolution.”

Peter Hearn, CEO of Guy Carpenter, said: “Although current renewals indicate that the decline in reinsurance pricing is slowing, this moderation was not surprising and the more interesting development may be the continued evolution of coverage and solutions to meet changing client needs.

“An abundance of available capital and improving analytics tools are essential components to create support for notable advances. An innovative mindset is the key to success in today’s marketplace as the increasing complexity of risk brings new levels of uncertainty.”

Already registered?

Login to your account

To request a FREE 2-week trial subscription, please signup.
NOTE - this can take up to 48hrs to be approved.

Two Weeks Free Trial

For multi-user price options, or to check if your company has an existing subscription that we can add you to for FREE, please email Elliot Field at efield@newtonmedia.co.uk or Adrian Tapping at atapping@newtonmedia.co.uk


More on this story

Insurance
3 January 2017   Pricing stabilisation will remain a major challenge for re/insurers and many buyers managed to improve terms and pricing in the year-end renewals, according to the latest 1st View Renewals Report from Willis Re.
Insurance
21 December 2016   Some of the pressures the re/insurance sector faced in 2016—low interest rates, uncertainties around Brexit and a soft market—are likely to persist in 2017. But some additional drivers are set to affect the performance of the sector, as described by executives from major players such as Markel, Swiss Re and Willis Re.