Stable capacity, rate on line projected in June 2009 for Canadian cat reinsurance

Catastrophe reinsurance in Canada is expected to show a rate on line (ROL) change of between zero and 5% at the June and July 2009 renewals, according to a Reinsurance Market Outlook published by Aon Benfield.
ROL is a calculation of reinsurance premium divided by reinsurance limit.
Aon Benfield said it further expects reinsurance capacity and retention changes in Canada to be stable.
Globally, reinsurer capital was reduced by 14% in 2008, which the outlook says is in line with expectations. Previously, the reinsurance intermediary estimated a decline of between 15% and 20% in reinsurer capital worldwide in 2008.
Despite the worsening economic environment, the reinsurance market has generally continued to function “in an orderly fashion” throughout the first quarter of 2009, Aon Benfield says. “June and July reinsurance renewals outside the U.S. are not expected to be meaningfully impacted by decreases in reinsurer capacity,” the outlook says.
The reinsurance intermediary says the decline in capital has been “significantly worse for insurers than reinsurers.” Global insurers saw significant declines in capital ranging from 25% to 30% in 2008.
But in most cases, says Aon Benfield, the impact on capital of events like Hurricanes Ike and Gustav “was small compared to realized and unrealized investment losses, on the order of one-thirteenth of investment losses.”
Reinsurance pricing has generally remained firm, the outlook says. “As we predicted, areas where reinsurers have higher accumulations, for example the U.S., Europe and Japan, have tended to see firmer pricing than geographies with lower accumulations.”