January 8, 2010 by Canadian Underwriter
The global reinsurance market is in a state of “disciplined softening,” according to Willis Re.
The assessment of the state of the marketplace stems from the Jan. 1, 2010 renewals, which saw measured premium rate reductions, a release says.
“Despite global economic headwinds, the reinsurance industry has enjoyed one of its most profitable underwriting years for a number of years,” said Peter Hearns, CEO of Willis Re.
“This is due to the recovery on the asset side of reinsurers’ balance sheets in line with the strong performance of global markets in 2009. The position, however, is worse for reinsurers’ clients, where stagnant premium growth is pressuring expense ratios, particularly in mature markets.
“Reinsurers have listened to these concerns and responded sensibly with measured premium reductions.”
Rate reductions have been easier to achieve on growing portfolios, where reinsurers have been more flexible about increased exposures for a similar premium volume, the release says.
But on stable and decreasing portfolios, where buyers have been seeking reductions in pure monetary premium amounts, reinsurers have shown less flexibility to maintain their own premium volume.
The main area for pricing inadequacy for more reinsurers remains long-tail classes, especially in the United States, Willis Re says. Only the financial lines have shown indications of hardening following the Jan. 1 renewals, despite calls for a market hardening.