Reinsurance pricing starting to stir: A.M. Best

The reinsurance market is showing signs of stirring after years of soft pricing, weak investment returns and high catastrophe losses, A.M. Best reports.
In its Special Report, ‘Reinsurers are Ready to Move as the Market Begins to Stir,’ A.M. Best suggests that the “state of virtual paralysis” in the reinsurance market may be starting to lose its grip.
Underwriting performance in 2010 was bolstered by a significant amount of favourable loss-reserve development, but this is unlikely to be the case in 2011, the report says.
“The year began with what was thought to be a robust cushion of capital, but catastrophe losses have consumed a portion of that excess capacity, and what remains is being managed very cautiously in anticipation of additional cat losses and the hope for a more dramatic improvement in property cat pricing at the January 2012 renewal,” it adds.
Munich Re estimated 2011 H1 natural disaster losses to be around $60 billion, roughly half of which were caused by the Mar. 11 Japanese earthquake and tsunami.
Considering also the U.S. tornado losses in May, the forecast for an active Atlantic hurricane season (with a heightened risk of landfall on the U.S. east coast), and the advent of Solvency II in Europe, “the effects of natural disasters worldwide are casting a shadow on resinurers’ balance sheets,” A.M. Best says. “[A]nd this has started to move pricing on property catastrophe risks, with some in the industry hoping for spillover effects into other lines – perhaps even casualty.”