Willis Re: Reinsurers Take Defensive Action, With P&C Rates Down by Up to 25%
LONDON, July 1, 2013 (GLOBE NEWSWIRE) -- Reinsurers are taking robust
defensive measures to maintain market positions recently eroded by new capital
markets entrants, according to reinsurance risk advisor and broker Willis Re,
a division of Willis Group Holdings plc (NYSE:WSH).
The Willis Re 1st View 1 July renewals report, entitled Supply Chases Demand,
finds that despite the impact of the US$ 30 billion Superstorm Sandy loss, the
key battleground is in U.S. Property catastrophe where capital markets have
been most active so far.
John Cavanagh, Global CEO of Willis Re, said: "Traditional reinsurers'
defensive actions include offering price reductions, larger line sizes and, in
some cases, broadening of cover by offering options such as multi-year
agreements, extended hours clauses and additional reinstatements. Capacity for
aggregate cover is also more widely available. As most programs are well
over-placed, buyers are facing the challenge of signing down reinsurers'
The offering from collateralized markets has also continued to evolve,
offering primary buyers increasingly flexible cover and minimizing their basis
Peter Hearn, Chairman of Willis Re, commented: "The trend for traditional
reinsurers to set up sidecar-type structures, providing third-party capital
access to the risk they are accepting, continues to expand. Similarly, the
catastrophe bond market continues to grow rapidly and is on track to surpass
the previous record high issuance in 2007 of US$ 7.2 billion. With the strong
inflow of new funds, the challenge for Insurance-Linked Securities (ILS) fund
managers is how to source enough demand to satisfy investor demand for ILS
The report finds that this is proving challenging, as growth in the largest
catastrophe market, the United States, remains modest, as does the take up
rate of capital market solutions in other markets – despite the increasing
competitiveness of price as compared to traditional reinsurance products.
The softening in U.S. Property catastrophe rates and traditional reinsurers'
desire to maintain their market positions is spilling over into other classes.
The report finds that casualty markets are seeing substantial increases in
capacity across the world and, consequently, prices are softening even though
there are concerns about the current low interest rate environment.
The report also found that:
oRates are down as much as 25 percent on some Florida Property catastrophe
oLosses caused by U.S. tornadoes and European floods during the second
quarter will only have a modest impact on the global reinsurance market.
As it stands, it is not easy to see any end to the continuing softening of
the global reinsurance market
oWith the modest outlook for growth and improvements in underwriting
profitability, many reinsurers are re-examining their capital management
strategies in an effort to improve their overall results
oThe changing dynamics in the distribution of Specialty and large
commercial risks continued to evolve actively in the second quarter. A
number of new initiatives were launched, the majority of which are aimed
at direct and facultative markets
Please click here to view the report.
About Willis Re
One of the world's leading reinsurance brokers, Willis Re is known for its
world-class Analytics capabilities, which it combines with its Reinsurance
expertise in a seamless, integrated offering that can help clients increase
the value of their businesses. Willis Re serves the risk management and risk
transfer needs of a diverse, global client base that includes all of the
world's top insurance and reinsurance carriers as well as national catastrophe
schemes in many countries around the world. The broker's global team of
experts offers services and advice that can help clients make better
reinsurance decisions and negotiate optimum terms. For more information, visit
Willis Group Holdings plc is a leading global risk advisor, insurance and
reinsurance broker. With roots dating to 1828, Willis operates today on every
continent with more than 17,000 employees in over 400 offices. Willis offers
its clients superior expertise, teamwork, innovation and market-leading
products and professional services in risk management and transfer. Our
experts rank among the world's leading authorities on analytics, modeling and
mitigation strategies at the intersection of global commerce and extreme
events. Find more information at our website, www.willis.com, our leadership
journal, Resilience, or our up-to-the-minute blog on breaking news,
WillisWire. Across geographies, industries and specialisms, Willis provides
its local and multinational clients with resilience for a risky world.
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