Reinsurers continue to be pressured by alternative capitalentering the marketplace, but Willis Re says in a new report thatmutual insurers can leverage this dynamic to strengthenrelationships with traditional reinsurers.

In its “1st View April 2013 Renewals Report,” Willis Re saysthat “changing distribution models coupled with aflood of alternative capital has left many reinsurers concernedover both their existing portfolios and their access to futuregrowth.”

Robin Swindell, executive vice president of Willis Re, says in astatement accompanying the report that mutual insurers can use thisnew reality to their advantage. “Traditional reinsurers are veryaware that while some larger commercial buyers are reducing theiruse of reinsurance in this phase of the reinsurance cycle, mutualbuyers value long-term sustainable relationships throughout theentire cycle. This is the perfect time for mutuals to demonstratethat they are reinsurers' preferred customers.”

Willis Re notes that, for mutual insurers, policyholders, notexternal shareholders, are the ultimate owners. “This means theyhave less access to other forms of capital, and as a result, mutualinsurers are often heavily reliant on reinsurance to provide themwith additional capital to deal with catastrophes and largelosses.”

John Haydon, executive vice president of Willis Re, says,“Mutual insurers are in business for their members for thelong-term and should receive the recognition they deserve fromreinsurers.

Outlining the challenges reinsurers face with respect to capitalmarkets expanding the scope of their activities in insurance-eventrisk, Willis Re says, “Currently, approximately $35 billion ofcapital is flowing into the global reinsurance market through avariety of sources. Further, there is a clear acceleration in thevolume of fresh capital seeking appropriate opportunities.”

Reinsurers are adapting to respond to the new challenge. “Whilesome reinsurers are considering how to respond, others aredeveloping third party capital management propositions to offertheir own skills and platforms as fund managers.”

Overall, Willis Re says most reinsurers produced strong resultsin 2012, “comfortably overcoming the impact of both low interestrates and Superstorm Sandy.”

The broker adds, “Any lingering concerns over Superstorm Sandyat the end of 2012 have been rapidly forgotten and many reinsurershave used their good results to support a variety of capitalmanagement actions while maintaining capital strength.”

For U.S. property reinsurance, Willis Re says overall downwardpressure on pricing is continuing, while capacity remains healthy.“With sufficient capacity, pricing variations are being driven byindividual company experience, exposure changes and perceivedattitudes towards long-term relationships versus opportunisticcapacity,” Willis Re says.