Canadian reinsurance market sees drop in cession rates

The Canadian reinsurance market has been impacted by a decrease in cession rates, and now there is a need for sustainability to combat the volatile underwriting results, Jean-Jacques Henchoz, president and CEO of Swiss Reinsurance Company of Canada, told attendants of the Insurance Institutes At the Forefront breakfast in Toronto.
The main reason for cession rates decreasing in Canada, he suggested, was the strong results experienced by primary insurers over the past year, putting pressure on reinsurance rates.
The primary insurers have very ambitious growth targets, and if they want to reach these growth targets they need to retain more of their net, Henchoz explained.
He pointed to volatile underwriting results for Canadian reinsurers over the past five years where combined ratios soared in 2001 at 117.98%, dipped to 94.93% in 2003, spiked to 104.78% in 2005 and dropped to 89.4% in 2006.
In the long run, we need as an industry to do better, he said. We need to have a sustainable performance, where clearly our value proposition is to be here in case of a major disaster.
And the global trend of increasing weather trends is taking place in Canada, he warned. Exposures are rising, and while severity of the events has not become a big issue, frequency of such events is increasing he added.
The good news is that the cat market is growing in Canada, its also an opportunity for us as long as price and terms are acceptable from a shareholders perspective.