From Artemis:
According to the latest report from reinsurance broker Willis Re the June 1 and July 1 mid-year renewals have seen significant reinsurance rate reductions as excess capital continues to chase muted demand, with the competitive market dynamic continuing.And:
Reinsurance rates remain under considerable pressure, according to Willis Re, as the excess capital in the market, both traditional and non-traditional or alternative, continues to chase what business is available. Demand for reinsurance remains muted, with insufficient growth to soak up the capital which the industry is awash in.
The softening market environment has been compounded by the low levels of loss activity through the first-half of 2014. Further inflows of capital from alternative market sources and insurance-linked securities (ILS) keep the pressure on, although Willis Re notes that much of the competition is being driven by traditional reinsurance markets, not ILS investors.
Buyers continue to reap the rewards of the soft market, with increasingly better and more relaxed terms and lower reinsurance pricing, however they are not recycling the savings back into more demand, which again further compounds this softening cycle.
“The tentacles of the softening market are spreading far and wide, with no immediate signs of relief. We’ve seen muted demand throughout 2014 and market dynamics are unlikely to change for some time to come. The current market position is increasingly challenging for reinsurers. Below average loss ratios in the first half of 2014 and reasonably adequate reserving positions mean that, barring any major underwriting or investment losses in the coming months, we will see another year of reasonable returns. This places further pressure on rating levels for 2015,” commented John Cavanagh, CEO of Willis Re.
The tiering of reinsurance markets by buyers, into traditional, collateralized reinsurance and ILS markets, is also upping the competition. Both reinsurers and fund managers trading through the competitive market environment are being forced to carefully examine their strategies, Willis Re notes.
The upshot of this competitive market and tiered capacity provider paradigm is that reinsurers have to accelerate their plans, making mergers & acquisitions, capital restructuring and the formation of reinsurance sidecars with ILS investors become more likely, says the report....MORE
Reinsurance market sees lowest risk margins in a generation: Aon Benfield
The global reinsurance market is seeing the lowest risk margins in a generation, as traditional and alternative reinsurance capacity providers discover just how low their cost-of-capital will go, according to Aon Benfield’s latest renewal report.
As both traditional and non-traditional providers of reinsurance capacity find their risk appetite limits, in terms of the cost of their underwriting capital, it is presenting opportunities to cedents and stimulating new growth opportunities for insurers, says Aon Benfield.
The low-cost of reinsurance protection is also presenting growth opportunities to reinsurers, according to the report which will provide some solace to reinsurers feeling beaten down on price, as governments may be able to reduce their participation in catastrophe exposed regions as the availability and affordability of insurance and reinsurance improves.
Record levels of reinsurer capital and continued building interest from alternative capital investors have pushed the margins on reinsurance risks lower at June and July renewals, said Aon Benfield. The margins that can be earned on some reinsurance programs are now at their lowest levels for a generation, which shows just how soft this market is compared to some others seen in the last decade or two....MORE
