Part of the reinsurance market lies in turmoil while other sectors may be experiencing a stabilization in pricing, creating a "Tale of Two Markets," according to a report issued by insurance broker Willis Group Holdings.
In a report on this year's January renewals, issued by Willis Re, Grahame Millwater, chairman and chief executive officer, wrote that 2005 was an extraordinary year for catastrophes, but the hurricanes through the Gulf of Mexico that year "are on all our minds" as insurers work to complete Jan. 1 renewals.
Reinsurance markets "such as retro (retrocession), marine, energy and U.S. property [are] in significant turmoil and undergoing major revisions of terms, conditions and structure. However, in other parts of the reinsurance market…the environment is best described as 'stable' rather than 'hard.'"
"The question is whether this 'Tale of Two Markets' is temporary or will be sustained," he continued.
He noted there are factors that may contribute to a limited hardening trend, including strong balance sheets and the arrival of new capital through investors.
In the report, Peter Hearn, CEO, and Paddy Jago, president and managing director of Willis Re, noted that currently in the U.S. "some major catastrophe programs remain incomplete." They noted that programs have seen "significant elevation of attachment points and substantial increases in premium." Despite cutbacks in programs, coverage is still available, they said.
Rating agencies and modelers, they predicted, will raise the bar and recalibrate their methodology.
The casualty market will remain flat, with some softening, they forecasted. They also said the reinsurance picture will become clearer in 2006, "but no more palatable" to both insurers and reinsurers.
On the global side, James Vickers, CEO Willis Re International, noted that while catastrophe risks are seeing increases, other areas are seeing varying degrees of reaction among the reinsurance community. Much of the impact, he noted, will ultimately come from the impact of the U.S. catastrophe market on international markets and the duration of future hardening or stabilization.
A copy of the full report is available at www.willis.com/news/Publications/Willis_Re-View_06.pdf.
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