June 3, 2014 by Canadian Underwriter
Continued competitive pressure from alternative markets, strong reinsurer balance sheets and low loss experiences have combined to increase downward pressure on reinsurance pricing since the June 1, 2013 renewal, reports Guy Carpenter & Company, LLC.
In its June 2014 renewal briefing, Guy Carpenter notes that competition increased as markets offered abundant capacity at reduced pricing.
Terms and conditions came under pressure, multi-year transactions continued to be an area of investigation, traditional reinsurers sought to protect their market share and alternative providers looked to utilize growing funds, notes a statement from Guy Carpenter, a provider of risk and reinsurance intermediary services and a wholly owned subsidiary of Marsh & McLennan Companies.
“Assessing the outcome of the June 1, 2014 renewal, it is clear that the pace of the pricing decline observed in 2013 has not relented,” Lara Mowery, global head of property specialty at Guy Carpenter, says in the statement. “As catastrophe bond pricing continues to fall, reinsurers are continuing to find ways to compete. New product offerings are abundant, as flexibility and tailored coverage are becoming trademarks of this rapidly evolving market,” Mowery adds.
Other findings in June 1, 2014 renewals report include the following:
Guy Carpenter notes hurricane activity in 2014 is expected to be below average, although development in the northern Caribbean and West Atlantic is a distinct possibility, and storms developing in this area have a higher chance of landfall.
That said, the outcome of the 2014 hurricane season will have a strong influence in determining the future direction of reinsurance pricing and capacity, it adds.
“This year, heading into wind season following eight consecutive years with no hurricane loss and continued excess capacity, we are seeing solid discounts from last year’s pricing,” George Carse, Guy Carpenter Tampa Branch manager, says of the Florida market.
Overall, “with reinsurance spend and inwards book concerns, interest in bundling reinsurance into multi-line placements, for example, and alternative products such as catastrophe bonds has remained high in 2014,” notes Guy Carpenter.
Mowery adds that a main challenge facing reinsurance buyers is the expanding variety of structure options from a growing number of providers. “The dynamics of this renewal season demonstrate the benefits of consistent communication with markets and a thorough understanding of the risk being presented, particularly in a rapidly evolving marketplace.”
Have your say: