NU Online News Service, Jan. 4, 3:35 p.m. EST
In two reports, insurance brokers said the reinsurance marketplace has made a remarkable recovery through 2009 and remained disciplined in its pricing through the Jan. 1 renewal season.
Aon Benfield, the reinsurance brokerage arm of Chicago-based insurance broker Aon Corp., and Willis Group Holdings' Willis Re released reports last week assessing the state of the reinsurance market.
Aon Benfield's report, "Remarkable Recovery," said that capital increased "dramatically" for both insurers and reinsurers in 2009 from the lows in March of that year.
"Capacity for the global catastrophe reinsurance market has been restored to near its all time peak of December 2007," and is higher than what was seen during the January 2009 renewal season, Aon Benfield said.
Both Aon Benfield and Willis Re said the market's Jan. 1 renewal season was focused on decreases, with Willis Re calling the declines "disciplined softening."
In its report, "Orderly Softening," Willis Re said reinsurers "generally maintained a responsible underwriting attitude toward their own capital suppliers" and recognition to their clients' requests concerning Jan. 1 renewals.
The approach, Willis Re continued, reflects underwriters' concern that 2009′s results have less to do with "attractive pricing" and more to do with "a below-average pattern of natural catastrophe and man-made losses."
Peter Hearn, chief executive officer for Willis Re, said in a statement that the reinsurance industry has enjoyed "one of its most profitable underwriting years" in a while, primarily because of the recovery in reinsurers' asset side of their portfolios.
Bryon Ehrhart, CEO of Aon Benfield Analytics, said reinsurers during the Jan. 1 renewals "showed markedly less anxiety than last year" and exhibited a lot of interest in growing accounts. He added that rates "reflected a disciplined view."
Aon Benfield put the rate of decrease in a range of 5-to-15 percent.
For the upcoming April, June and July renewal season, Aon Benfield said it expects continued softening, "assuming no significant reinsured catastrophes occur prior to final negotiations."
Willis Re noted that rate reductions were easier to achieve on "growing portfolios" by accepting more exposure without increasing premium. However, where the account is stable or declining, reinsurers were showing "less flexibility to maintain their own premium volume."
In its report, Willis Re noted that there is pricing inadequacy in the long-tail market and that there are questions as to whether this will continue for possibly a year or two or if a single incident may harden the market.
Aon Benfield observed that in some lines, such as directors and officers liability, reinsurers "have substantially erred on the side of safety and priced or structured themselves out of a material segment of the casualty business."
The reports are online at www.aon.com/reinsurance and www.willis.com.
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