April 7, 2009 by Canadian Underwriter
Reinsurance rates have continued to increase for the U.S. property and catastrophe reinsurance market as of the Apr. 1, 2009 renewal, according to a briefing issued by Guy Carpenter & Company LLC.
The briefing, titled Rates Up on Tightening Capacity at U.S. 4/1 Prop-Cat Renewal, is available for download at www.GCCapitalIdeas.com.
Guy Carpenter’s briefing shows rates for national programs increased between 10% and 14% on a risk-adjusted basis.
By comparison, reinsurance rates increased 11% on average at the Jan. 1, 2009 renewal.
Quoting behavior varied widely, ranging from a decrease of 15% to an increase of 15% for certain programs.
The market decline has played a role in the loss of capacity, the briefing suggests.
“According to the Guy Carpenter Global Reinsurance Composite, shareholder funds dropped 18% last year, reflecting a decline in capital of $19.7 billion,” the briefing says.
“Unrealized losses on investment assets accounted for 53% of the decline. Share repurchases and dividend payments resulted in the depletion of capital as well, though most programs were suspended by the end of last year.”
Looking forward, capital is likely to continue to be constrained in 2009, the briefing says.
“Uncertainty in the financial markets [is] likely to impair investment assets,” the briefing comments. “The ability to secure additional capital will depend on specific companies and lines of business.”