July 21st, 2009

U.S. Surety Renewal at July 1, 2009

Posted at 1:01 AM ET

Eric van Elkan, Managing Director and Scott MacColl, Managing Director
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Reinsurance renewals for surety cedents generally remained flat (with some slight increases) through the July 1, 2009 renewal in the United States. The price increases that did occur were driven by program size, changes in net exposure and loss experience — larger programs that needed more capacity tended to sustain the greatest increases. Smaller programs with favorable loss histories, on the other hand, generally saw reinsurance rates remain flat.

As the industry looks ahead to the end of the year, some are concerned that broader economic instability could lead to higher insured losses, which would result in an increase in reinsurance rates at the January 1, 2010 renewal. Claim frequency is up this year from the historical low levels of 2008, yet loss ratios for 2009 remain below the industry’s historical average. Economic stability should alleviate any upward pressure on reinsurance rates, particularly since claims are still fairly low.

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