Cedants are expecting reinsurance rates to fall during the upcoming renewal season, according to a market survey by Aon Re.
Aon Re International chairman and chief executive Clement Booth said that price had overtaken the financial security of reinsurers as the main concern of reinsurance buyers.
The survey, conducted during the summer, asked 50 European reinsurers and insurers about their expectations for the 2005 renewal season.
It found that the hard market is over, with an overwhelming 97% of buyers and sellers of reinsurance anticipating reductions in renewal prices.
Buyers indicate that they are prepared to change reinsurers or retain more risk themselves if these price expectations cannot be met, while sellers of reinsurance admit that they will be willing to carry lower prices providing technical pricing levels are not breached.
Booth said that reinsurance “prices are declining generally but they're not collapsing”, with different classes and geographical locations affected in different ways.
Aon Re UK deputy chairman Charlie Cantlay said that Hurricanes Charley and Frances had not had a significant impact on pricing, but had “concentrated the minds” of reinsurers. He said it was too early to predict whether Hurricane Ivan would have an impact on the upcoming renewal season, but that reinsurers generally priced large losses accounting for a 2%-5% rise in combined ratio into normal year results.
