Capacity For Reinsurers Seen Plentiful; Concerns Loom In 2010

NU Online News Service, Jan. 7, 2:23 p.m. EST

Most reinsurers have far more capital than a year ago, capacity is abundant, but problems lie ahead for the marketplace, Holborn reinsurance brokerage predicted.

In a report titled "2010 Reinsurance Outlook: A Balanced Market," New York-based Holborn said "falling business production and rising expense ratios are concerns for both insurers and reinsurers," this year.

It added that the depressed levels of employment and economic activity are producing flat or declining exposure bases. "Market premium volumes continue to shrink, both due to reduced exposures, and increased levels of price competition among insurers," Holborn reported.

The report said to manage capital it expects reinsurers to buy back shares, merge, or both during the year ahead.

Holborn's study noted the reinsurance market showed "a fair amount of stress" at the beginning of 2009, stemming from large loss activity and the financial meltdown in 2008.

"There were several large losses in the market, including Hurricane Ike, which we estimate as one of the three largest losses to the market ever," the report said.

In the U.S. reinsurance market, Holborn noted that in Jan. 2009, contracts with rate increases "significantly out-numbered" those with decreases. Rates increased again for second quarter renewals, according to the report, but then began to subside by July 1, 2009. By late 2009, "much of the pressures had eased," said the report.

Some factors leading to the reversal, according to Holborn, were:

o Strong half-year earnings for many reinsurers.

o Improvements in financial results stabilized ratings for XL and Swiss Re. Transatlantic Re was successfully spun out of AIG.

oReduced anticipated catastrophe model estimates.

oReduced premiums and reduced desire among ceding companies for limit increases due to the recession.

oThe weakening dollar and relative strength of the euro, Swiss franc and British pound.

Now, most reinsurers have "far more capital than a year ago," according to the report.

It said, "Catastrophe experience has been benign this year to the worldwide market, with no individual event costing reinsurers over $1 billion. Equity and currency markets have recovered about half of their 2008 and early 2009 losses, and the credit market has reopened for financial institutions."

About the Author
Phil Gusman, PropertyCasualty360.com

Phil Gusman, PropertyCasualty360.com

Phil Gusman is Managing Editor of PropertyCasualty360.com. Prior to joining National Underwriter in 2008, he was Editor of Insurance Advocate. Gusman has also served as Associate Editor of Crackdown!, an insurance fraud publication, and Assistant Editor of Empire State Report, which covers New York politics. He graduated in 2002 from Plattsburgh State University in New York. Gusman may be reached at pgusman@summitpronets.com. Follow him on Twitter: pgusman and PC360_Markets

Comments

Resource Center

View All »

Do Your Clients Hold The Right CDL License?

Learn about the various classes of CDL Licenses and the industries that are impacted by...

Integrated Content & Communications: A Key Business Issue For Insurers

Insurers are renewing their focus on top line growth, and many are learning that growth...

High Risk Insurance Coverage in the E&S Market

Experts discuss market conditions, trends and projected growth in a rapidly changing niche.

Top E-Signature Security Requirements

This white paper covers the most important security features to look for when evaluating e-signatures...

EPLI Programs Crafted Just For Your Clients

Bring us your restaurant clients, associations and other groups and we’ll help you win more...

Is It Time To Step Up And Own An Agency?

Download this eBook for insight on how to determine if owning an agency is right...

Claims - The Good The Bad And The Ugly

Fraudulent claims cost the industry and the public thousands of dollars in losses. This article...

Leveraging BI for Improved Claims Performance and Results

If claims organizations do not avail themselves of the latest business intelligence (BI) tools, they...

Top 10 Legal Requirements for E-Signatures in Insurance

Want to make sure you’ve covered all your bases when adopting e-signatures? Learn how to...

Get $100 in leads with $0 down!

NetQuote's detailed, real-time leads have boosted sales for thousands of successful local agents across the...

PropertyCasualty360 Daily eNews

Get P&C insurance news to stay ahead of the competition in one concise format - FREE. Sign Up Now!

Advertisement. Closing in 15 seconds.