Canadian Underwriter

Reinsurance capital levels suggest hardening reinsurance market: Guy Carpenter

November 23, 2011   by Canadian Underwriter

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Historical capital levels of Guy Carpenter’s Global Reinsurance Composite between 1998 and 2011 Q2 suggest reinsurance rates may soon be on the rise.
As of 2011 Q2, the capital level of reinsurers grouped in Guy Carpenter’s Reinsurance Composite approached just over $160 billion, which is touching the trend line.
When capital levels are above the trend line, reinsurance rates often fall. When capital levels fall below the trend line, a hardening market characterized by increased rates typically ensues.
The capital levels of the reinsurance composite last plunged below the trend line during the financial crisis of 2008-09. Prior to that, the line fellow below trend during the hard market of 2001-04.
The capital level was above trend between 2009 and the early part of 2011.

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