Reinsurance rates for both property and casualty risks have remained flat during the Jan. 1 renewal season, according to a broker's study.
The report by Willis Group Holdings also said the major exception was U.S. property business where an insurer has significant East Coast or Gulf Coast wind exposed business.
The report attributes five factors to this premium growth:
oReinsurers have sought to bring January renewals of nationwide and critical catastrophe accounts in line with mid-2006 pricing levels with cedants experiencing rate increases of around 40 percent;
oReinsurance pricing is reflecting the perception of increased volatility that is embedded in the latest catastrophe models;
oReinsurers and their investors have a new appreciation for those insured values and the resulting catastrophe exposures in the Northeast.
oNot enough retrocessional capacity for reinsurers to spread their catastrophe risks. Reinsurers thus require greater returns to compensate for this increased retained exposure.
"Looking forward to 2007, the atmosphere of relief is almost tangible as the market takes advantage of the current respite [from heavy catastrophe losses] and works to apply the hard learned risk management lessons of the 2004 and 2005 underwriting years," the report said.
Willis Re Chief Executive Officer Peter Hearn said that last year's benign catastrophe losses have helped not only to generate strong underwriting results for reinsurers, but also to fuel a competitive environment this year.
"In Europe, Asia, Australia and Latin America and classes of businesses not prone to natural catastrophes rates are flat or have fallen 5 percent or 10 percent," he said.
The report analyzed the following classes:
oU.S. Casualty – Several new excess and surplus lines casualty startups along with indications of interest from Bermuda 2005 startup insurers have led to a 5 percent decrease for desirable business.
oInternational Casualty – Good results for reinsurers have encouraged rate concessions but treaty conditions have shown little change.
oU.S. Marine – Increased reserving from Hurricanes Katrina and Rita are feeding into renewal pricing. Reinsurers are verifying cedants' implementation of catastrophe exposure management plans.
oU.S. Professional Liability – Modest increase in capacity and appetite for directors and officers with slightly improved terms and conditions.
oU.S. Surety – Rate reductions of 5 percent to 15 percent on increased levels of exposure driven by improving portfolio credit quality and continuing good experience.
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