Prices seem to stabilise at mid-year renewals
Source: Asia Insurance Review | Aug 2015
Signs of a stabilising reinsurance pricing trend have surfaced at the recent 1 July renewals, mostly in peak property catastrophe zones as supply and demand began to equalise, according to Willis Re’s 1st View Renewals Report. Competition however, remains intense for non-peak areas where traditional reinsurers still dominate the market.
The report said that the recent pricing trend across both the 1 June and 1 July renewals was driven by the significant increase in demand for Floridian catastrophe capacity. Secondly, the recent swell in capacity from collateralised reinsurance markets – which has played a major role in driving pricing down in the peak zones – appeared to have abated, with a number of these markets now showing pricing discipline by cutting the capacity they were prepared to offer as rates continued to soften throughout the first half of 2015.
While property catastrophe pricing competition may be cooling, the reinsurer M&A frenzy continues. The report noted that despite the unappealing short-term outlook for nearly all companies across the sector, such activity was helping to maintain current high valuations. And despite diminishing underwriting and investment returns being delivered, investor capital continues to be attracted to the sector.
Looking ahead to 2016, Mr John Cavanagh, Global CEO of Willis Re said: “The June and July 2015 renewal season offers reinsurers some hope. With the North Atlantic Hurricane season now underway, even if the predicted low level of hurricane activity is realised, the outlook for 2016 might not be quite as bleak as may have been inferred from the January and April 2015 renewals.”