Global CAT reinsurance prices “lower”

Upon recent monitoring of the terms and conditions regarding the global property catastrophe insurance renewals for Jan. 1, 2006, Standard & Poor’s Ratings Services says it is concerned that improvements in pricing and coverage terms might not be as significant as previously anticipated.
S&P’s notes that the market trends it has been monitoring are not set to be fully developed until Florida renewals are complete around July 1, 2006.
“Material improvements in pricing and coverage provisions in lines of business most affected by the 2005 catastrophes including energy (offshore/onshore), U. S. coastal property, and property retrocession have indeed been attained,” S&P’s reports.
However, S&P’s continues to report that these improvements are only being realized regionally where the catastrophes occurred and improvements do not appear to have spread to other geographic areas and lines of business.
These other ‘less successful’ areas indicate static trends in both pricing and terms and conditions.
“This is contrary to our expectation that increased frequency and severity assumptions would support material improvements in pricing and coverage terms outside of purely those contracts and locations that suffered losses in 2005,” S&P’s reoports. “The trickle-down effect on other lines of business seems to have been limited so far.”
In September 2005, as the basis of their expectation that there would be a “broad market hardening,” S&P’s cited an increased frequency and severity of large loss events that included: all of the hurricanes that struck over the last two years; a record number of typhoons that made landfall in Japan in 2004; and the substantial losses associated with Windstorm Erwin in Europe in 2005.
Information concerning January renewals portrays an incomplete picture of evolving market conditions that the largest European reinsurers have not yet commented on.
S&P’s says that even though they have not heard reinsurer insights, they will remain alert to market developments because they are concerned that “without a broad-based hardening of rates, carriers might not be adequately pricing their business in light of the occurrences of the last two years.”
S&P’s says it will continue to monitor the global property catastrophe market throughout 2006 and that when a more definitive view of these evolving trends are determined, they will comment on their likely impact on company ratings.