The primary market is somewhat soft, despite increased costs. For reinsurance programs with good experience, clients are looking to keep increases to leveraged trend or less. For programs with higher than expected losses, many cedents were willing to increase retentions to keep costs down. This motivates reinsurers to compete strongly for available business despite uncertainty around the potential impacts of health insurance reform on business performance.
Quota share programs generally share the same increases as the direct pricing and have been up to 10 percent below trend. For excess of loss contracts, rates have increased in a range from 10 percent to 15 percent, well below leveraged trend.
Another dynamic is developing in the higher layers. More claims are hitting high in the USD1 million excess of USD1 million layer than before and even in layers excess of USD2 million. Manual rates confirm the observation with high-layer increases in 2009 and 2010.
Rates are also up for government programs, where the underlying trend is heavily impacted by state budgets and policies. Stop loss programs for this business are up 6 percent to 8 percent despite many states’ fee reductions to help control costs. A big cost element is Emergency Room claims, which are up 19 percent in some cases, helping drive overall cost trends higher than that for revenues received.