Willis Sees Flat To Falling Rates On Reinsurance

Reinsurance rates overall should continue to run flat or decline through the July 1 renewal season barring a major catastrophe, a reinsurance broker said.

Willis Re, a unit of London-headquartered insurance broker Willis Group Holdings, in its report titled “Few Surprises” said reinsurance rates at the April 1 renewal period remained flat or fell, depending upon the specific insurance risk.

The report said that barring a major catastrophe, the pattern is expected to accelerate come the July 1 renewal period.

Record profits in 2006 and a combined ratio at less than 95 are credited with creating these results.

The four-page report also notes that there has been a “financial rebirth” in the reinsurance arena with the attraction of new capital. In the fourth quarter of 2006 there were eight new property-casualty insurers created in Bermuda and four new Lloyd's syndicates, the report noted.

Willis Re said that the impact of the expansion of the Florida Hurricane Catastrophe Fund to supply reinsurance at bargain rates has yet to be felt by reinsurers.

The firm said Florida's action appears to have spurred other states to consider expansion of their own catastrophe funds. Willis Re's report said the belief that expansion of the Florida fund would impact non-U.S. catastrophe prices has proven unfounded through the April 1 renewal season.

While rates in the United States for property remain “static,” reinsurance providers have not increased occurrence limits, the report continued. Pricing is coming under pressure on catastrophe risks because of the lack of losses and new capital, and future renewals could see improved terms for cedants.

The report also covers the United Kingdom, Japan, India and Korea.

Copies of the report are available at www.willis.com.