2010-11 cat losses have not yet driven up demand for reinsurance capacity: Aon Benfield

The unusual combination of catastrophic losses occurring in 2010-11 has not yet driven affected insurers to seek more capital, purchase higher reinsurance limits or raise prices/decrease exposures materially for the insurance products they sell, a report from Aon Benfield says.
“However, the largest of these loss-affected programs have yet to renew in 2012 and it is possible that insurers and governments affected by catastrophe losses in 2011 will increase the size of their reinsurance programs when renewed at April, June and July of 2012.”
In its January 2012 report, Reinsurance Market Outlook: Value Creating Capital, Aon Benfield notes that global insurance capital remains strong despite significant retained catastrophe losses and “new catastrophe models have not generated significantly higher demand for reinsurance.”
At the same time, insurer earnings and capital are challenged by low interest rates associated with global economic uncertainty, sovereign debt issues in Europe and similar federal and state borrowing issues in the United States. U.S. insurers’ earnings and capital also suffered from record high levels of retained tornado and hail losses.
“It is…likely that larger global insurers will again find value in protecting large corporate catastrophe protections in regions where significant earnings events may occur,” the report says. “The capital available from traditional reinsurers and investors in catastrophe related products have sufficient capacity to meet this potential new demand.”
Aon Benfield said new catastrophe models, in addition to talk about price increases in non-loss-affected reinsurance programs in order to make up for reinsurer losses in loss-affected regions, have combined to temper new demand for January 2012 capacity.