Reinsurance renewals reveal tightening of limits
April 2, 2012 by Canadian Underwriter
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Global reinsurers experienced more positive results in the first quarter of 2012, but they are still committed to rate stability and underwriting discipline in key regions, according to a report from Willis Re.
The lower levels of loss activity in international markets this year “have been slightly overshadowed by reinsurers” disappointing 2011 result,” Willis Re notes in 1st View April Renewals Report: Measured Reaction. “Looking ahead, the major challenge for reinsurers is earning acceptable returns on their capital . . .
“Despite signs of improvements in rating levels in the primary and reinsurance market, most reinsurers remain hesitant to increase their portfolios, preferring to conserve capital and wait for further improvements.”
The report cites the flooding In Thailand as an event in which “exposures were significantly underestimated, especially as regards the extent of global connections across sophisticated supply chains.” Willis Re says the “technical and psychological impact” of the Thai floods will “far outweigh the ultimate financial loss for years to come.”
A record year for losses in 2011 has led to reinsurers applying tighter limits on natural perils, including lower event limits of pro rata treaties. Reinsures are also seeking greater transparency, particularly for overseas exposures and contingent business interruption, according to Willis Re.
“Reinsurers remain focused,” says Peter Hearn, chairman of Willis Re. “They are taking a highly segmented and increasingly disciplined approach to terms and conditions and are not seeking to apply blanket rate increases. In turn, this is leading to wider variations in rate movement by territory and class.”
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