Buffett has pulled General Re back to avoid guaranteed-loss underwriting.
From Artemis:
The just-completed April reinsurance renewals saw a continuation of recent trends, with pricing down as much as 20% 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 1st reinsurance renewals, with the pressure from capital markets and non-traditional investors continuing (as forecast by Artemis) and the traditional reinsurance market continuing to be well-capitalised. However, the latest renewals report from reinsurance broker Willis Re states that price declines have been seen across the board, showing that the impact of this abundent reinsurance capital is spreading.
Willis Re said that reinsurance rates have softened across all lines of business, with rate reductions of as much as 20% seen on some lines of business and in some regions. This confirms the fears of many traditional reinsurers, that the market continues to soften and we are likely to see further year-on-year declines on the U.S. reinsurance renewals in July.
The trends observed at the January renewals have continued and show clear signs of accelerating, said the reinsurance broker. One of the key factors keeping up the pressure on rates is the ‘seemingly unabated supply’ of capital from third-party investors, said Willis Re.
The addition of continued inflows of third-party capital on top of the well-capitalised traditional reinsurance capital, combined with muted new demand for reinsurance capacity, is creating a perfect storm of too much capital and capacity chasing a pool with too little supply. Hence the continuing acceleration of reinsurance rate declines.
John Cavanagh, CEO of Willis Re, commented on market conditions; “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.”...MORE
