View this article online: https://www.carriermanagement.com/news/2015/07/09/142376.htm
Guy Carpenter: July 1 Re Renewals Display More Moderate Decline
July 1 reinsurance renewals show continued price declines, but the downward trend moderated, especially for U.S. wind-exposed programs, Guy Carpenter said in its latest briefing.
The Marsh & McLennan subsidiary pointed out that additional limit placed over the past few months helped stabilize price declines. Also contributing: higher demand for reinsurance and expansion of tailored coverage from previous seasons.
For the U.S. property market, capacity that was authorized but unused shrunk to 17 percent, versus 26 percent at July 2014. While this is an improvement, the number is still higher than the average of 15 percent from January 2011, Guy Carpenter said.
Some help came from continued light overall catastrophe loss activity, leading to 2015 losses that are largely limited so far to Northeast winter storms. As well, traditional reinsurers with robust remaining capacity as of July 1 dominated U.S. property per risk excess of loss placements, according to the report.
Lara Mowery, managing director and Guy Carpenter’s head of global property specialty, noted in prepared remarks that conditions have improved to the point that some reinsurers cited a lack of capacity in June and early July as a reason for cutting back on a program.
That’s not true for everyone, however. Mowery also said “there is certainly no capacity shortage overall and reinsurance capital has grown once gain.”
Here are some of Guy Carpenter’s July 1 renewal findings:
- For the first time in the last three renewal seasons, many markets were in a position of dwindling aggregate for U.S. wind-exposed zones.
- Demand for worldwide property catastrophe coverage is up around 8 percent, reflecting continued growth since spring 23014. Driving this trend: new entities purchasing coverage and companies using part of their savings to boost their coverage, fill in gaps or provide additional coverage as they expand their business.
- Wide choices of alternative capital continued to adversely impact the reinsurance market over the first six months of 2015. For example, the highest quarterly volume of 144A P/C cat bonds matured in the first quarter, returning more than $3.5 billion of principal to investors. This continued in the second quarter with another $1.6 billion of catastrophe bonds maturing, leading to a total of $5.15 billion of outflows on a gross basis. Offsetting this: $3.84 billion in primary issuance in 16 transactions from two new sponsors.
- Latin America enjoyed coverage and capacity increases for pro rata business at the July renewal.
- The U.S. casualty market continued to soften through July 1 renewals, but at a slower rate compared to 2014 and early 2015.
- In the U.K., directors and officers liability and professional liability experienced expanded coverage and wider terms and conditions. Programs consolidated however, and reinsurers are monitoring cyber risk accumulations within this sector.
- Workers compensation capacity increased for quota share programs in the U.S. market. For July renewals, additional and higher single claimant limit quoting and binding took place up to $20 million. As well, renewal of the U.S. terrorism risk insurance program helped make this sector more stable.
- Aviation has “abundant” reinsurance capacity and has not been adversely impacted by recent major aviation losses.
Source: Guy Carpenter