Reinsurance Focus

The major reinsurance brokers have published their analyses of the reinsurance market for catastrophe risks during fourth quarter of 2013, the catastrophe bond market and predictions for renewal rates for traditional reinsurance during early 2014. These analyses generally predict declines in renewal rates for traditional reinsurance for cat risks in the neighborhood of 10-14%. The factors contributing to the declining rates include: (1) further increases in capital in the market; (2) competition from a strong catastrophe bond market; and (3) moderate levels of cat losses in recent years. A separate report summarizes the activity in the catastrophe bond market during 2013.

• Aon Benfield suggests that traditional reinsurers enhance their competitiveness by providing unlimited hours for U.S. named storm occurrences and by reducing the cost of reinstatements. Reinsurance Market Outlook: January 2014 (includes a rating agency and regulatory update)
• Guy Carpenter notes that the softening of rates-on-line has extended to non-cat markets due to increased reinsurance capacity, and that reinsurers have offered the following enhancements to coverages: aggregate and quota share cover; multi-year arrangements; extended hours clauses; better reinstatement provisions; early signing opportunities at reduced pricing; and expanded coverage for terrorism and cyber risks. January 2014 Renewal Report: Capacity, Evolution, Innovation and Opportunity
• Willis Re also notes an increased capital level in the market, moderate loss levels, softening of rates in non-cat markets and the retention by some major insurance groups of more risk due to stronger balance sheets. Changes in the market include more complex, multi-class and multi-year reinsurance and more pooling arrangements to provide access to the market to smaller reinsurers. 1st View: 1 January 2014
• A concise summary of the cat bond market in 2013 may be found in a short publication from Property Claim Services titled PCS Full-Year 2013 Catastrophe Bond Report: Underlying Change. Although this report over emphasizes the role of index triggers in cat bonds (as opposed to indemnity triggers), it does highlight the important trends of the broadening of the scope of risks encompassed by cat bonds and the issuance of such bonds by midmarket cedents.

This post written by Rollie Goss.

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