After a relatively quiet 2012 in terms of natural catastrophe losses, most reinsurers are not facing any material impact and remain within their annual catastrophe budgets, suggests a new report from Willis Re.
Natural catastrophe losses for 2012 are estimated to be half of the previous year’s $120 billion, Wills Re notes as part of its January 2013 renewals report. That’s led to a stabilisation of rates on property classes and no blanket rate increases, the company says.
The report, Reinsurers Clear the Sandy Hurdle, suggests that, in general, international rates for property catastrophe business are risk adjusted flat to -5% and U.S. property catastrophe rates are risk adjusted flat to -5% on loss free accounts, and +10% on loss impaired accounts.
“In the absence of Superstorm Sandy, reinsurers would have found it difficult to resist buyer pressure for further concessions,” Peter Hearn, Willis Re’s chairman and John Cavanagh, the company’s CEO noted in the report’s opening letter. “As such, Sandy’s impact has helped to stabilize market pricing on an overall basis and reinsurers have largely delivered to their clients in terms of capacity and continuity.”
Repercussions of the global financial crisis, such as dwindling investment returns, are still the primary influence of conditions and pricing in the reinsurance sector, Will Re also notes. That’s despite good underwriting results in 2012 and new capital entering the market during the year, the company says.
While Sandy had little major impact on an international level, the marine market suffered in 2012 on of its worst underwriting years in recent history, Willis Re suggests. The storm is “widely expected to be the largest ever Marine loss with a disproportionate impact on the Marine market,” it notes.
“Overall, the global reinsurance market has maintained a measured and increasingly client-centric approach by providing adequate capacity to buyers, together with an increasingly differentiated approach at a client- and class-specific level,” the report notes.
“Final terms and conditions have, in most cases, been in line with client expectations, as reinsurers largely delivered on the undertakings they made in the run up to renewal.”