February 21, 2005 by Canadian Underwriter
Based on January 2005 reinsurance renewals, European carriers have not given in to competitive pressures despite rising capacity, notes a report by A.M. Best.
While overall reinsurance rates declined moderately, with the exception of some U.S. hurricane-exposed risks, the pricing drop was a shallow one, the rating agency notes. However, much remains to be seen heading into 2005, including whether or not new Bermuda players may try to undercut pricing to attract new business. Established market leaders could try to use their position to withstand this potential pressure to soften.
The modest softening of European property risks, which represents about two-thirds of the treaty renewals studied, were offset by double-digit increases on U.S. loss-making non-proportional catastrophe treaties. Casualty writers remain selective on terms and rate.
Reinsurers continue to strengthen reserves on prior-year U.S. liabilities, A.M. Best notes, with uncertainty about ultimate exposures remaining in 2005 and potentially dragging results despite favorable underwriting performance for current years.
Reinsurers also remain concerned about rising natural catastrophe costs, as evidenced by the U.S. hurricanes and Japanese typhoons in 2004. “Increasing frequency in natural catastrophes and potential for new causes of losses (i.e., electromagnetic fields) make it more difficult to prospectively forecast underwriting results as indicated by the 2004 earnings revisions of the leading reinsurance players,” the rater notes.