Sandy stabilises reinsurance pricing at January renewals
With the majority of the January 1 reinsurance renewal contracts now bound, two company reports find that while Hurricane Sandy didnt harden the market overall, it did help reinsurers maintain prices after a year in which natural disaster costs fell.
According to a Willis Re report on the 1/1 renewals, prices for property-catastrophe reinsurance for January 1 renewal rose ten percent for US customers with losses and were unchanged to down five percent on businesses without losses. International rates were unchanged to down five percent, the London-based broker said.
The industry benefited in 2012 as losses from storms, earthquakes and other catastrophes fell by half from 2011s $120 billion, even as the bill for Sandy may reach $25 billion, Willis said.
In the absence of Superstorm Sandy, reinsurers would have found it difficult to resist buyer pressure for further concessions, the broker said in the report. As such, Sandys impact has helped to stabilise market pricing.
The report, called Reinsurers Clear the Sandy Hurdle, looks at the state of the market at the key juncture of the January renewal season and discusses rate trajectory, conditions, the collateralised and retrocession markets and various lines of reinsurance business.
The report concludes that while property reinsurance rates are stable with no blanket increases at January renewals, Hurricane Sandy could leave its mark as the largest loss ever for the marine insurance industry, one area that is seeing rate hikes.
2012 was a particularly difficult year for the marine market, which had one of its worst underwriting years in recent history. Major losses include the Costa Concordia and the deterioration of the Rena loss from 2011, plus Hurricane Sandy, which destroyed a number of personal yachts and pleasure boats.
Aspen Reinsurance, which gave its assessment of the January 1 reinsurance renewal season in a conference call yesterday, said Sandy is estimated at a potential $3 billion or more loss to the US marine market.
Renewals at 1/1 were complicated by the lack of exact loss data, but achieved rate increases in the 30 percent range, the company said.
After years of soft market frustration, the marine business is now likely to generate several interesting opportunities, said Aspen Re CEO, James Few.
The Bermuda-based reinsurer said that Sandy, the second largest cat event in US history, has caused a firming trend.
The industry has now not only benefited from rate improvement post event, but we are also seeing evidence of selective rate firming, especially in the US, Mr Few said. At the same time, investment yields remain at historic lows and there is finally growing recognition that without rate improvement, the effect of low yields will impair profitability.
Aspen Re finds that in the wake of Sandy, property catastrophe rates in the US have improved ten to 30 percent on accounts directly impacted by the storm. The larger, national and excess and surplus lines per risk treaties affected by the storm experienced rate increases ranging from ten to 12.5 percent.
Facultative property reinsurance rates remain flat with the exception of some positive movement in the Northeast US, most notably for wind and flood post Sandy. And rate increases for casualty reinsurance remain elusive, but are slowly improving and look more encouraging than in January 2012, Aspen Re said.
Mr Few said Aspen Re views the market as mixed, but that it is showing signs of building on some of the rate improvements of 2012.
Unfortunately, while improving in some areas, the level of market turn isnt yet sufficient to improve rates in all segments, Mr Few said. However, I am encouraged that the recognition of the need for change is genuine and given the undeniable impetus of these hard market drivers, it appears the market is moving toward a steady, less dramatic but more prolonged hardening in several key areas.
BHB staff bill rises to almost $200m
Thomas calls for action on accounts backlog
Masterworks café reopens as Homer’s
Two arrests over major incidents
Former BHS student revels in Oscar moment
Missing man, 56, found
Bike theft on island is getting out of hand
New route for End-to-End
Economists: Fix it or get out of the way
Dellwood staff revolt over ‘sudden’ sackings
Gabriel Rodriguez (1936-2020)
Enjoying a lifetime adventure in Bermuda
Insurers deny Premier’s Patients 1st claim
Residents feel the economic pinch
Simmons: Bermuda’s entrepreneurs are the key
Take Our Poll