Reinsurers See Rate Increases Continuing into 2013

Factors in the reinsurance marketplace point to continued moderate rate increases going forward, two reinsurers say as the annual Reinsurance Rendezvous kicks off in Monte Carlo. 

In a statement outlining comments by company executives at the meeting, Swiss Re says competing factors are currently in play pulling the rate environment in different directions. “On the one hand, lower interest rates and higher solvency requirements point to firmer pricing, while low inflation rates, reserve releases and excess capital speak for lower prices,” Swiss Re says. 

Swiss Re Chief Executive Officer, Reinsurance, Christian Mumenthaler, says the factors driving increases will likely win out in the near future. He says, “Upwards pressure on prices for (re)insurance is likely to rise, as low interest rates continue to depress running yields and drag return-on-equity levels down, significant reserve releases will not go on forever and solvency rules are tightening all over the world.”

Hannover Re, meanwhile, says treaty renewals in the current year have resulted in a “positive outcome” for the reinsurer, as 2011 catastrophe losses led to “significant price increases,” particularly for loss-impacted programs.

Speaking to other factors at play in 2012, Hannover Re says, “The treaty renewals were once again influenced by the low interest rate level and the associated difficulties in generating sufficient investment income. As a result, the considerable discipline exercised with respect to technical pricing was sustained.”

Chief Executive Officer Ulrich Wallin said during a press conference in Monte Carlo, “We are confident that this trend will continue in the treaty renewals as at [Jan. 1, 2013].”