Strong balance sheets and an abundance of capacity led to lower reinsurance pricing across most territories and business segments for April 1 renewals, according to Guy Carpenter.

“Despite a spike in insured losses during the first quarter of 2014 after severe storms and floods hit parts of Asia, Europe and the United States, excess reinsurance sector capital and rising supply from traditional and alternative sources continued to impact the market and affect pricing in Asia and the United States at April 1 renewals,” said James Nash, CEO of Asia Pacific Operations at Guy Carpenter.

U.S. property-catastrophe business saw soft pricing and a focus on tailored terms and conditions. Although the bulk of protection purchased was placed on a traditional excess-of-loss basis where capital market sources have less involvement, alternative capacity providers continued to impact the market by offering capacity with flexible terms and conditions at reduced pricing while traditional providers responded to market conditions, protecting their market share.

The degree of rate decreases in Japan was generally greater than pre-renewal expectations, and buyers benefitted from price and cost reductions in most main lines of business, as supply often exceeded demand. Mergers, corporate restructuring, improved cedent balance sheets and a combination of perils in catastrophe covers all culminated in reduced demand at renewal.

April 1 renewals saw strong reinsurer interest in Korean casualty excess-of-loss lines due to their strong historical performance, which meant increased competition driven by new participants in the space. Property excess-of-loss programs were hit by three big risk losses in 2013, which impacted deductibles of non-marine treaties. Nevertheless, there was sufficient capacity to place business.

India was hit by a number of natural catastrophes in 2013, including flooding and cyclone landfall, but the events had a limited impact on the market. Original property rates remained soft with no sign of correction, despite reinsurers voicing concern and retreating from proportional programs. Programs were placed late in the renewal, supported by select reinsurers that put up substantial lines and then leveraged their position to get equal shares on nonproportional programs.

Source: Guy Carpenter