Jan. 1 Reinsurance Renewal Price Drops Moderate: Guy Carpenter

Once again, Jan. 1 reinsurance renewals are indicating pricing declines, but the trend has moderated somewhat.

Property catastrophe pricing fell 3.7 percent at Jan. 1, according to the Guy Carpenter Global Property Catastrophe Rate-on-Line index, versus a 9 percent decline a year ago.

At the same time, Guy Carpenter said that the insurance linked securities space saw pricing decreases as high as 30 percent, something the firm said helped trigger reinsurance price drops as ILS firms dealt with lower issuance later in 2016.

Guy Carpenter CEO Peter Hearn said that the renewal moderation was not exactly a shocking development.

“Although current renewals indicate that the decline in reinsurance pricing is slowing, this moderation was not surprising,” Hearn said in prepared remarks. “The more interesting development may be the continued evolution of coverage and solutions to meet changing client needs.”

Hearn added that “an abundance of available capital and improving analytics tools are essential components to create support” for those advances envisioned to address client needs and demands.

“An innovative mindset,” Hearn said, “is the key to success in today’s marketplace as the increasing complexity of risk brings new levels of uncertainty.”

Further report details:

• Guy Carpenter and A.M. Best found that dedicated reinsurance capital increased by 5 percent from Jan. 1, 2016 to Jan. 1, 2017 after staying “fairly stable” in 2015.

• The convergence capital segment grew by 10 percent.

• Catastrophe bond issuance in the 2016 first quarter was the most active in the market’s history, though second-quarter catastrophe bond issuance fell to its lowest quarterly level since 2011. Catastrophe bond providers responded to this by offering more flexibility in coverage and big price decreases.

• Echoing Munich Re’s recent assessment of 2016 global natural catastrophe losses, Guy Carpenter noted that “significant global insured loss activity reached a four-year high in 2016.

• The Guy Carpenter report said that insured loss grew more than 50 percent from 2015.

“Losses were spread through several regions and perils, with no single mega-event driving the increase,” Guy Carpenter noted. “Renewal pricing impacts were localized.”

Source: Guy Carpenter