Reinsurance pricing continued to fall almost across the board at the April 2014 renewals, according to the 1st View renewals report from reinsurance broker Willis Re.

Trends observed by Willis during the January 1, 2014 renewals continued and showed “clear signs of acceleration”. The report stated: “Positive 2013 results for traditional reinsurers and a seemingly unabated supply of capital from third party investors have added further to the oversupply of reinsurance capacity chasing muted demand.”

The report quoted John Cavanagh, CEO of Willis Re, who said: “The 1 April renewals have seen a softening of rates across nearly all classes and geographies which, in turn, has allowed buyers to achieve substantial savings in the cost of their reinsurance protections.

“Some buyers took the opportunity to buy more cover and some renewals saw an expansion in terms and conditions. The overriding target for most buyers, however, was to achieve price reductions or an increase in ceding commissions.

“Restructuring and consolidation of covers by some of the larger buyers continues to be a trend along with M&A consolidation causing further compression in price in favour of the buyer.”

The 1st View renewals report also noted that many primary insurance company buyers, most noticeably international and regional US companies, are still “cautious” in their use of insurance-linked securities (ILS) and collateralised markets.

In addition, Willis noted that major traditional reinsurers have “worked hard to optimise the use of their client relationships, capacity and technical underwriting capability to protect and, in some cases, increase their shares to help withstand the challenges of competing with the ILS and collateralised markets”.

It said these reinsurers have also stepped up efforts to manage their capital through increased share buy-backs, special dividends and other techniques.

“In spite of the softening rate outlook, stock valuations of quoted companies remain attractively high. In fact, a number of companies are taking advantage through public share offerings to provide existing investors with an exit strategy,” Willis said.

Artemis, an online publication that reports on insurance-linked securities (ILS), catastrophe bond and non-traditional reinsurance capital markets yesterday said it had recorded $1.585 billion of new catastrophe bond and insurance-linked securities issuance in the first quarter of 2014.

An article on the topic stated that the first-quarter of 2014 has seen the highest level of new transactions issued for any first quarter since Artemis.bm began tracking and analysing the catastrophe bond and insurance-linked securities market nearly 15 years ago.

Steve Evans, owner and editor of Artemis.bm, commented on the record start to the ILS market’s year: “The impressive level of issuance seen in the first quarter of 2014 is testament both to the accelerating acceptance of catastrophe bonds and ILS as risk transfer tools by insurers and reinsurers, as well as the continued and growing appetite to invest in insurance linked assets shown by institutional investors such as pension funds.”

Eleven new cat bond or ILS transactions were recorded in the Artemis Deal Directory during the first-quarter of 2014, with an average deal size of $144 million. “Three of these deals were smaller, often termed ‘cat bond lite ’ transactions, but even excluding those Q1 issuance was still a record at $1.51 billion,” stated the online publication.

Mr Evans added: “Q1 2014 saw a range of transactions come to market, from repeat sponsoring insurers and reinsurers showing their commitment to the ILS market as a source of protection, as well as from a number of new sponsors issuing their first ILS deals.”

Artemis said that despite the efforts of traditional reinsurers, investors showed strong support for the cat bond and ILS transactions issued during the first quarter and demonstrated their increasing appetite for yielding assets which help them to diversify their portfolios. The majority of the ILS deals issued in the first-quarter of 2014 increased in size as their books became oversubscribed.

This also resulted in prices decreasing as the transactions were marketed to investors, generating additional savings for the sponsors. “Investors, such as global pension funds, family offices, endowments, hedge funds and other institutional money managers, continue to show a strong appetite for insurance and reinsurance as an asset class.”

Earlier last month Artemis had predicted: “This year it is expected that the key Asia-Pacific region renewals will provide a demonstration of the expanding reach and influence of alternative reinsurance capital and insurance linked securities.”

Reporting in recent days on actual results, Artemis said the just-completed April reinsurance renewals saw a continuation of recent trends, with pricing down as much as 20 percent across most lines of reinsurance business, as the effects of record traditional and alternative reinsurance capital continue to be felt.

“Further price declines had been expected to manifest at the April 1 reinsurance renewals, with the pressure from capital markets and non-traditional investors continuing — as forecast by Artemis — and the traditional reinsurance market continues to be well-capitalised.”

Artemis pointed to the potential of some elements of the market being more exposed than in recent years. “How that will pan out should the market suffer a series of major losses remains to be seen.”