Slight softening of Canadian rates during January 2010 renewals: Guy Carpenter

The Jan. 1, 2010 renewals saw a slight softening of rates in Canada, according to a Guy Carpenter GC Capital Ideas report.
Property per risk covers with little or no loss activity averaged reductions of 3% to 6%, while greater loss activity pushed rates up on average 5% to 10%, according to the report, Canada Sees Slight Softening of Rates at Jan 1 Renewals.
Depending on loss activity, casualty programs’ working and clash layers were generally flat, with working layers increasing 3% to 5% if there were significant losses, and clash layers declining 3%.
An estimated $2-billion to $3-billion in additional catastrophe capacity was purchased at the renewal, since changes to RMS’s earthquake model created an increase in companies’ British Columbia probable maximum loss by 30 to 50%, the report said.
Cat rates increased from 5% to 10% for programs with losses, and generally declined 3% to 6% without losses, Guy Carpenter reported.
“Generally, rates were pushed this year to confine the level of oversubscription that has been typical of the market (for property per risk and cat business) for the past few years,” the report found. “This continues to occur in part because of the continuing trend of foreign-controlled insurers to incorporate some or all of their Canadian property and cat exposures within global reinsurance programs controlled by the parent.
“This practice leaves a preponderance of long-tail exposure in the domestic reinsurance market without the potentially desirable and diversifying short-tail exposures.”