January reinsurance renewals lack drama: Fitch

Overall, the January 2005 reinsurance renewal season was “much less dramatic” than might have been expected given the significant catastrophe losses seen by the industry in recent years, notes a new report by Fitch Ratings.
The rating agency notes that despite terrorist attacks, hurricanes and typhoons, and the dramatic swings of the hard market, most reinsurers reported a relatively calm renewal this year. However, European reinsurers seemed much happier with their experience than their U.S. and Bermudian counterparts, Fitch adds. “Fitch attributes the divergence to differences in portfolio composition and distribution rather than fundamental differences in underwriting between individual insurers.” But the results of the renewal season highlight the need for portfolio diversification (for e.g., because some Bermuda insurers were hard hit by last year’s Florida hurricane season) and underwriting discipline as the market softens.
Overall, Fitch says the most recent renewals did not produce pricing and market conditions significant to change the sector’s stable ratings outlook, although there was a modest negative impact on credit fundamentals. Nonetheless, the rater believes on the whole current premium rates remain technically adequate.
Fitch expects the sector’s 2005 combined ratio, in the absence of abnormal catastrophe losses to be 96%-98%, with ROEs in the high-single-digit to low-teens.