Willis Re: Prices softening beyond property catastrophe business

A heady cocktail of converging factors has fuelled a soft buyers’ market in nearly all lines of business at the January 1 renewals, according to the First View Renewals Report from Willis Re.

Challenges faced by both traditional reinsurers and new capacity are myriad, according to the report. These include rate reductions, new capacity and market entrants, low interest rates, greater retention of reinsurance premiums by large buyers, diminishing reserve releases, expansion in terms and conditions, and increasing regulatory oversight.

John Cavanagh, CEO of Willis Re commented: “The key influence on the January 1 renewals has been overcapacity triggered by a number of converging factors. Strong 2013 results have bolstered traditional reinsurers’ already strong balance sheets. New capital from non-traditional capital market sources has grown to reach USD50 billion. These factors have been compounded by muted demand from buyers arising from the longer term trend of better regulation, which has in turn let to a better understanding and management of tall risk, as well as the trend of major insurance groups to retain more reinsurance premium volume and risk on their own growing balance sheets.”

Peter Hearn, chairman of Willis Re, said: “Faced with these market headwinds, reinsurers are adopting a variety of strategies. Larger reinsurers are using their balance sheet strength and technical ability to offer more capacity and more complex, multi-class, multi-year deals. Others are expanding into specialty lines and many have developed multi-channel capacity offerings seeking to use their underwriting expertise to deploy capacity on behalf of capital markets. Additionally, we have seen the rise of pooling arrangements that give smaller reinsurers the opportunity to access business they might not otherwise see in their local markets.”