Reinsurance rates continue to decrease: Willis

Some larger insurers are increasing their reinsurance retentions

A new Willis report says reinsurance rates are continuing to decrease as additional capacity continues to enter the market, despite large losses and lower rates.

Read:What the sea change in reinsurance means for you

“The January renewals have unfortunately confounded the hopes of commentators that the market was reaching a pricing floor,” John Cavanagh, Willis’ Global CEO, said in a release. “However, as reinsurers look to close their 2015 accounts, most will likely report reasonable headline results. But looks flatter to deceive. As the Willis Reinsurance Index for the first half of 2015 demonstrated, underlying RoEs of reinsurers are at an extremely low 5.1 percent after adjusting for reserve releases and abnormally low catastrophe losses. 2015’s full year analysis is likely to show further reductions as under-reserving issues start to appear at both a primary company and reinsurer level.”

Some firms are using the lower premiums to buy more reinsurance, while some larger insurers are increasing their reinsurance retentions. This is primarily because of improved risk management but the report also warns some companies may have “potentially misplaced optimism around underwriting results… as original rates reduce.”

 

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