Reinsurance renewals 2006 see underlying pressures

Last year’s unprecedented catastrophe losses had an uneven impact on pricing and capacity at 2006 reinsurance renewals, according to Benfield’s recently published renewal report “Reinsurance Market and Renewals Review Swings and Roundabouts.”
Benfield’s 82-page report finds that the hurricanes that occurred in 2005 caused dramatic increases in reinsurance rates in the US, particularly for property catastrophe business in loss-affected areas and in the non-marine retrocession and marine reinsurance markets.
In other areas, the hurricanes had a generally stabilizing influence, reversing the downward price trend.
“The immediate impact of the hurricane season fell short of the market changing event some expected,” Grahame Chilton, chief executive of Benfield, says. “However, we believe that the market has changed. Continuing development of 2005 losses, recalibration of catastrophe models and the shrinking appetite for peak exposures are some of the factors which will exert further upward pressure on pricing.”
Chilton explains that reinsurance capacity is likely to be significantly tighter for the July 1, 2006 renewals and beyond. This, he continued, is likely to lead to a general re-rating across global markets.
Loss affected property catastrophe treaties in the US experienced the most substantial price increases with some cases increasing by more than 100%, according to the report.
Loss-free property business in the US was up 10-20%, compared with price falls of up to 20% in January 2005.
There were swings from price decreases in 2005 to either flat or low double-digit growth in the areas of Latin America, the Caribbean, Western Europe, Australia and Central and Eastern Europe.
A worldwide post-renewal survey of Benfield brokers conducted during the first two weeks of January 2006 found that cost was the primary concern for 33% of reinsurance customers, with security and ratings (27%) and coverage, terms and conditions (23%) also being referenced as significant issues.