Reinsurance rates continue to fall despite economic pressures, says Guy Carpenter
Reinsurance broker Guy Carpenter & Company said there were no surprises as the market continued to soften at the 1/7 renewals.
The broker said that property and liability renewal rates were still declining in the current soft market.
For property-catastrophe covers, risk-adjusted pricing dropped between 10 percent and 20 percent, compared to last year.
According to Guy Carpenter, both lower and higher layers declined by double digits relative to 1 July 2007 renewals, with quotes and firm order terms (FOTs) down relative to the previous year. FOTs for higher layers were down between 15 percent and 20 percent year-over-year, while for lower layers, they sustained declines of 10 percent to 15 percent. In addition, quote ranges narrowed, as reinsurers responded to the realities of the market.
“Even as we see this continued decline in rates, there are a number of factors adding some stability to the reinsurance markets,” said Chris Klein, global head of Business Intelligence at Guy Carpenter. “As time passes, the absence of a mega-catastrophe has made carriers wary of being caught unprepared. Furthermore, global economic conditions have reduced equity valuations, putting pressure on carriers to increase the profitability of their underwriting.”
Outside of the United States, price drops were below the market average because of recent increases in the frequency of smaller catastrophes. In Caribbean markets, programmes were significantly oversubscribed, reflecting the overcapacity in the marketplace and the need for reinsurers to post revenue gains.
The broker added: “For casualty lines, the reinsurance market is showing more discipline than the primary market. Major players in primary liability lines are pursuing market share aggressively. Sharp decreases in primary pricing, coupled with pressures on ceding commissions, are pushing some reinsurers to the sidelines.
“In several cases, reinsurers are seeking to switch from proportional cover to excess of loss, where they believe they have more control over the price of their product.”