January 4, 2010 by Canadian Underwriter
Reinsurance rates across most lines of property catastrophe business declined at the Jan. 1, 2010 renewal, according to a briefing released by Guy Carpenter & Company LLC.
“A combination of factors — including the rally in global financial markets, relatively low catastrophe losses in 2009 and lingering recessionary effects on demand — has resulted in an excess of supply and heightened competition at this year’s Jan. 1 renewal,” says Chris Klein, global head of business intelligence at Guy Carpenter.
“As a result, what we saw was an unusually slow renewal, in which a number of contracts did not close until very late in the season, as buyers sought to gain maximum pricing advantage.”
Guy Carpenter reported risk-adjusted catastrophe prices in the United States decreased by an average of 6%.
This picture is “somewhat complicated by recent adjustments to catastrophe models that have decreased predicted losses for earthquake and wind perils,” the report notes. “Factoring in modelling adjustments, rates declined by as much as 11% on average.”
The report notes that a significant exception to the general downward trend in pricing is programs with significant tornado and/or hail exposure in the middle of the United States.
“Many of these programs sustained losses in 2009, and as margins traditionally have been very competitive, pricing has adjusted upward in response to the loss activity.”
Treaty retrocession saw a modest increase in capacity, as two new underwriters in the Lloyd’s and Bermuda markets entered the market, while a number of existing underwriters showed an increased appetite.
“Several potential new suppliers are poised to enter the market should a large loss turn pricing significantly,” the report says.