Reinsurance pricing stabilizes amid dynamic capital growth: Guy Carpenter

An environment of dynamic capital growth and ample reinsurance capacity saw pricing stabilize in most regions at Apr. 1 reinsurance renewal, Guy Carpenter & Company notes in a briefing released Wednesday. 

“Guy Carpenter feels that an accurate understanding of how the market is converging and where the capacity will be deployed is essential to creating new competitive advantages at future renewals,” David Flandro, global head of business intelligence, notes in a statement from the global risk and reinsurance specialist.

“This begins with an accurate and rigorous study of the sources and uses of capital, as well as an accurate quantification of available and deployed reinsurance capacity,” Flandro says.

Guy Carpenter reports the convergence of traditional and alternative capital sources is changing the marketplace, with non-traditional capacity now making up an estimated 14% of global property catastrophe limit.

Non-traditional capacity is having a significant impact on property catastrophe business in the United States, the statement notes. Traditional reinsurance pricing to date has decreased on similar coverages from the Jan. 1 renewal.

In the U.S., “for the few, but sizable placements renewing at Apr. 1, traditional reinsurance pricing was down generally in the single digit range. Non-traditional capacity has impacted the market and is expected to continue to do so in the upcoming June renewals,” Guy Carpenter adds.

Other key highlights from the briefing include the following:

• Japan – A year largely absent of major catastrophe losses saw rates decrease moderately for most catastrophe excess of loss lines in the country, although losses from the Tohoku earthquake and Thailand floods in 2011 still influenced the 2013 renewal by limiting downward pressure on prices.
• Republic of Korea – Three typhoons produced a relatively turbulent 2012 for the Korean insurance market. Subsequent adjustments to pricing resulted in rate increases to catastrophe excess of loss treaties on a risk-adjusted basis, while pricing for loss-affected risk excess of loss treaties also rose significantly.
• India – Softer market conditions saw reinsurance buyers increase their attachment points to save money or negotiate further to maintain a similar reinsurance spend against meaningful exposure growth.