High losses from 2011 are producing greater underwriting discipline among reinsurers when it comes to catastrophe-exposed renewals, according to a major insurance broker.
In a report titled "Change is in the Wind" that Willis Re released Dec. 30, the reinsurance-broking division of Willis Group Holdings says with the majority of this year's "catastrophe losses arising from unmodeled or inadequately modeled perils or territories, reinsurers are being more forceful in their demand for greater transparency of data."
Willis Re says reinsurers are seeking to sublimit their exposures to make the risks more manageable during the 2012 renewal period.
This was the second-worst catastrophe year for insurers on record, Willis Re says, with insured losses in excess of $100 billion and reinsured losses of more than $50 billion.
"There is work to be done by the industry to better understand the nature of the natural catastrophes which have caused 'surprise' losses this year," says Willis Re, noting the flooding in Thailand as one example.
The market is not witnessing blanket increases, says Willis Re. Instead, individual loss history and "perceived exposure movements" are driving increases.
Rate movements, Willis Re adds, are "largely being driven by the immediate earnings challenge of 2011 rather than the classic capital shortage of an historic hard-market rating turn."
Overall, capital levels in the global reinsurance industry "are only marginally down" from the beginning of 2011, says Willis Re. If 2012 is profitable, it is not clear if the market will see sustained hardening.
"Catastrophes striking the United States in the first nine months of 2011 caused $32.6 billion in direct insured losses—a figure that doesn't even include the significant insured losses which arose after the pre-Halloween snowstorm, which caused enormous damage to multiple states along the Atlantic seaboard," Robert Hartwig, president of the I.I.I., said in a statement. "Coupled with other events in 2011's fourth quarter, direct insured losses could exceed $35 billion this year."
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.