Reinsurers are getting higher rates, and there’s continued pressure on ceding commissions. But demand for reinsurance cover should remain stable even as prices increase, according to Munich Re America Reinsurance CEO Steven Levy.
“We expect reinsurance demand to remain stable as cedents are increasingly concerned about earnings volatility and are focusing on using reinsurance to help that issue,” Levy said during a Carrier Management interview at the APCIA Annual Meeting on Oct. 21 in Boston.
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Levy said rates are rising due to a solid trend that started earlier this year.
“What we’re seeing is essentially, to some extent, a contraction of supply in the retro market that is driving higher rates in reinsurance,” he explained. “We saw that certainly in the middle part of this year…, and we expect to continue that going forward.”
But Levy wasn’t prepared to say the market is hardening outright.
“Hardening suggests perhaps a greater level of tightness in the reinsurance market,” he said. “I don’t think we’re going to see a dramatic shift [in conditions, but rather] we’re going to see moderate rate increases and a moderate reduction in ceding commissions.”
In other words, Levy predicts “relatively stable” market conditions in the months ahead.
“I do expect reinsurance demand to remain relatively stable and perhaps increase to some extent, really continuing the trends we’ve seen in the market over the past two or three years, with reinsurance premium increasing at a fairly accelerated rate,” he said.
Levy noted that reinsurance premium in the U.S. has grown annually at about 10 percent or more on average over the past few years, “actually exceeding or maybe even doubling the growth in direct premium for primary insurance companies.” That won’t likely continue, but it doesn’t mean growth goes away, he added.
“We don’t expect that accelerated growth in reinsurance premium to continue at that rate, but demand [will] remain fairly strong going forward,” he said.