P&C reinsurance rates expected flat or falling in 2019

P&C reinsurance buyers said they expected reinsurance prices to remain flat or fall slightly during 2019, reflecting intense competitive pressure amid increased take-up of alternative capital and abundant total capacity, according to a Moody’s survey.

“Cedants cite abundant reinsurance capacity and competition as key reasons they expect prices to remain flat or decrease slightly in 2019, potentially stalling modest price hikes that followed the severe natural catastrophe events in 2017,” said Brandan Holmes, senior credit officer at Moody’s.

“However, while cedants foresee flat to declining prices during the 2019 policy renewals, their expectations have improved over the past three years. A number of cedants also intended to buy more reinsurance in 2019 to take advantage of its lower cost,” Holmes added.

The majority of respondents expected a modest decline in property reinsurance prices overall, with prices for US/Caribbean exposures remaining flat despite the supportive impact of substantial hurricane losses in 2017. Stiff competition amid abundant total capacity in the market remains the main factor behind the subdued pricing.

The majority of primary insurers foresaw no change in the amount they use of alternative capital reinsurance. However, some plan to use more, and none expect to use less. Collateralised reinsurance remains the preferred form of alternative reinsurance and cedants expect increased availability of alternative cover for casualty risks over time.

A slim majority of respondents expected to make changes to their reinsurance programs in 2019, with most planning to take advantage of soft reinsurance prices to purchase additional aggregate covers that help reduce earnings volatility. A few cedants also expected to change reinsurer allocations as a result of M&A activity in the sector.

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