Sandy helped to stabilize reinsurance market pricing | Canadian Insurance

Sandy helped to stabilize reinsurance market pricing

Global financial crisis still influencing conditions and pricing: reinsurance brokers

January 2013 renewals took place against a stable backdrop, as most reinsurers are not facing any material capital impact and remain within their annual catastrophe budgets, according to new renewals reports from reinsurance brokers.

“The market was supported by lower than normal CAT losses during the first nine months of 2012, new reinsurance capacity and record-high levels of capital,” states Guy Carpenter’s global renewal report, “The Route to Profitable Growth.”

In its report, “Reinsurers Clear the Sandy Hurdle,” Willis Re states that low catastrophe losses for 2012, which are estimated at 50% less than 2011’s losses of $120 billion (USD), have resulted in the stabilization of rates on property classes and no blanket rate increases at 1.1.

Read: Reinsurance industry stable: Aon Benfield

In the absence of Superstorm Sandy, reinsurers would have found it difficult to resist buyer pressure for further concessions. As such, Sandy’s impact has helped to stabilize market pricing on an overall basis and reinsurers have largely delivered to their clients in terms of capacity and continuity,” said Peter Hearn, chairman, and John Cavanagh, CEO, of Willis Re, in a press release.

However, the reports state that the repercussions of the global financial crisis will still influence conditions and pricing in the sector as investment returns are dwindling, primary companies in most mature markets are finding growth difficult and larger primary insurance groups are restructuring the way they buy reinsurance.

Read: Marine insurance market remains buoyant: Marsh

The reports highlight that 2012 was a difficult year for the marine market, which suffered one of its worst underwriting years in recent history.

“Already suffering from the Costa Concordia and the deterioration of the Rena loss from 2011, Superstorm Sandy is widely expected to be the largest-ever marine loss with a disproportionate impact on the marine market,” states the Willis Re report. “There are large losses coming from yachts and pleasure craft, general cargo, imported cars, specie and inland marine. In addition, the 1.1. 2013 marine renewals are especially late due to uncertainty surrounding losses emanating from Sandy.”

In its recent report, “As Drought Lingers, Crop Insurers Face Worst Underwriting Results in 25 Years,” A.M. Best states that, despite the drought, the net impact to insurers, after third-party reinsurance, will not materially affect any insurer’s capital position. A.M. Best anticipates no rating actions based on crop losses at this time.

With $20 to $30 billion in claims filed, A.M. Best estimates gross underwriting losses as of the third quarter of 2012 to be about $15.5 billion against estimated premium of $11 billion. The gross loss ratio is expected to top 135% and may even exceed 2002’s 139%, which had been the worst year in recent history.