The cost of reinsurance cover has peaked, even for regions exposed to US hurricanes, says a report out this week.
Willis Group Holdings has released its review of the global reinsurance marketplace. The report, entitled “Few Surprises,” reveals evidence that suggests the April 1 2007 renewal has continued the trends that manifested themselves last January. As such, April 1 pricing, depending on the insurers' specific experience, remained flat or fell.
“We fully expect this global trend, barring a major catastrophe loss, to accelerate with the July 1 renewals across all lines of business,” Willis said.
The report also highlighted that competition, capacity, and strong balance sheets are the key factors driving property reinsurance prices and increasing competition in other lines. A condition that is due, in part, to four factors:
1. The reinsurance industry is in robust shape. For example, the large global reinsurers have reported record profits for 2006.
2. The industry's financial re-birth has attracted new capital, for example eight new property and casualty reinsurers in Bermuda in Quarter 4 2006, as well as four new Lloyd's syndicates. As a result, there is more aggregate limit.
3. Reinsurers continue to seek greater balance for their portfolios. In particular, several markets have sought to increase writings in casualty and other lines to offset key zone property exposure.
4. The increasing global interest in reinsurance legislation and regulation has the potential to impact both price and capacity. The populist movement in Florida is one illustration of this and has resulted in the legislative expansion of the Florida Hurricane Catastrophe Fund (FHCF). The impact of this change has not yet become apparent and in particular, comments that changes in Florida could impact non-US catastrophe prices have proven unfounded at April 1.
