Reinsurance prices will fall and worsening terms and conditions will spread to new classes next year as the industry competes for business, said reinsurers and brokers gathering at their annual meeting in Monte Carlo.
An absence of costly disasters and increasing competition from new entrants dragged on prices this year as reinsurers struggled to halt the slide, industry officials said before starting talks with brokers and clients this week over next year’s property-and-casualty policies.
“Because of another year of low catastrophe losses we will see another difficult renewal season,” John Cavanagh, chief executive officer of reinsurance broker Willis Re, said at a press briefing in Monte Carlo yesterday. “Overwhelmingly, we continue to fight over the same pie.”
Prices dropped this year during each of the policy renewal periods in January, April and July as the industry faced rising competition, narrowing underwriting margins and record capital available for coverage.
Rates for property and casualty reinsurance are still being squeezed and talks for the January renewals are dominated by “extremely low interest rates for investments,” Munich Re, the world’s biggest reinsurer, said in a statement. Years where losses for reinsurers were relatively low are also adding pressure on prices, the company said.
“First you had ‘Desperate Housewives,’ now you read about desperate reinsurers,” Scor SE CEO Denis Kessler said at a press conference, adding rates in some areas have been eroded. Kessler reaffirmed the group’s targets.
One solution might be to move into new areas of business and sell cover for new risks, as there is “plenty of stuff to insure,” Alex Moczarski, CEO of reinsurance broker Guy Carpenter, said at a briefing on Sept. 13.
If it is just a matter of “business as usual” for reinsurers, then the market will continue to be challenging, Moczarski said. “If reinsurers do the same things as they are doing now, I would assume that, short of a huge catastrophe, the market will remain soft.”
“We think what is happening now is more of a structural change nature, not cyclical,” said James Vickers, Willis Re International chairman.
Swiss Re Ltd. and Hannover Re, the world’s No. 2 and No. 3 reinsurers, said today they see price declines for natural catastrophe reinsurance slowing next year. The scope for further rate reductions is “limited in light of the return on equity required by reinsurers,” Hannover Re said in a statement.