Reinsurance rates fell 5 percent for loss-free catastrophe programs in the Nordic region. This follows a decline of 2.5 percent to 7.5 percent at the January 1, 2010 reinsurance renewal. Loss affected programs generally renewed at rate on line similar to 2010. For per risk working layers, rates fell 5 percent to 10 percent, with high-risk excess programs stable year over year.
Reinsurance structures did not change at the January 1, 2011 renewal, and capacity was both consistent with the prior renewal and plentiful. Capacity for per risk programs increased.
Cedent interest in transferring risks on a proportional basis has increased over the last couple of years and continues to do so. The drivers for proportional solutions are both capital relief and a wish to decrease volatility in their own books. Ceding commissions are increasing due to increased appetite for proportional business in the market. Straightforward fixed or sliding scale commissions were preferred.
The economic recession hit the Nordic market hard (with the exception of Norway), leading to a decline in gross national product and a resulting decline in commercial and industrial insurance premiums. After three years of flat premium income, the insurance industry expects real growth in the premium income for 2011. In Sweden, rates fell 5 percent to 10 percent, were up 5 percent to 10 percent in Denmark and remained flat in Norway and Finland.
After a difficult first quarter, in which combined ratios were well in excess of 100 percent, the insurance industry recovered. Combined ratios are again below 100 percent, with the best-performing companies in the lower 90 percent range.
In 2011, we expect the Danish property and casualty market to continue to recover, while competition will remain fierce in Sweden and Norway.
The entire Nordic cedent base was affected by harsh winter conditions at the beginning of 2010, and many large catastrophe programs sustained losses, but the programs were only penetrated at the lower ends. During the summer, there were some heavy rain losses in Denmark but again only affecting lower layers.
The underlying exposure in Nordic reinsurance programs remains relatively flat, with a low increase in the underlying insured values. The reason is a remaining impact of the economic recession and low inflation.