January 12, 2005 by Canadian Underwriter
While reinsurance rates decline moderately in January, 2005 renewals, reinsurers appear to be handling the onset of the soft market in “orderly” fashion, says Standard & Poor’s.
In S&P’s annual “report card” on the global reinsurance market, credit analyst Stephen Searby says January 1 rate decreases were on the order of 5%-15% for loss-free accounts. “For loss-affected accounts and Caribbean risks, generally rate rises of up to 35% have been achieved, but this is only a small subset of the industry.”
Nonetheless, S&P says the real test of reinsurer pricing resolve will come at the end of 2005. “Periods of strong profitability have historically been followed by cyclical downswings in pricing to often uneconomic levels,” explains. Searby. “Despite the current discipline, this danger remains.” He says prices will text the limits of rational levels of return for 2006 renewals if reinsurers do not continue to hold the line.
Have your say: