January 21st, 2011

2011 Reinsurance Renewal Rates: Central & Eastern Europe

Posted at 1:00 AM ET

141x141jan1thumb24Reinsurance rates were driven by loss history for carriers in Central and Eastern Europe at the January 1, 2011 renewal. Consequently, it is difficult to point to a standard rate experience in this region.

Catastrophe excess of loss rates on line were generally down 5 percent to 10 percent for loss-free programs, with those affected by losses up by as much as 20 percent to 30 percent at the lowest layers. Middle layers were up around 7.5 percent, and top layers were flat or slightly reduced. Per risk working layers were also up 5 percent to 10 percent, generally as a result of either losses and/or increased exposure. Higher layers were flat to down.

Loss history has been an issue among CEE-based carriers in 2010. There has been a modest increase in fire risk loss frequency in southeastern Europe, for example. Several significant losses occurred in the catastrophe market in 2010, most notably flooding in Poland, Slovakia, Hungary and the Czech Republic. Hail storms in the Czech Republic and Slovenia and snow pressure in Poland and the Czech Republic were also a concern. Catastrophe frequency has eroded cedents’ retentions and resulted in a number of losses to lower cat layers.

Subject base exposure for property cat business was generally up by around 5 percent, with the premium generated down approximately 5 percent. Pricing on loss-free business tended to reflect the primary market. Reinsurers tended to look for shorter payback periods and higher rates on loss-affected layers, especially where they had suffered heavier losses.

Retentions increased for programs that experienced frequency losses in 2010, with some carriers purchasing higher limits in line with increased model results. Aggregate excess of loss programs protecting net retentions after inuring cat programs were in greater demand, as a result. Capacity remained generally unchanged, though some catastrophe-focused reinsurers were eager to write more excess of loss treaties. There is approximately EUR1 billion in catastrophe capacity available for the region, with around EUR 300-400 million for risk excess of loss. New Lloyd’s syndicates and Zurich-based start-ups brought some additional capacity to the market.

At this renewal, it was apparent that appetite for CEE business remains high, especially for reinsurers interested in taking advantage of increased rates and retentions for loss-affected programs. Some reinsurers are also looking at CEE opportunities as a way to diversify portfolios already heavy with Western European risks.

In terms of the reinsurance market, Solvency II is in its early stages in CEE, and some larger foreign-owned groups are already underway with their preparations, while many local domestic insurers, with a few exceptions, have yet to react to the forthcoming regulatory requirements. Nonetheless, carriers in this region are starting to seek more insights into Solvency II compliance, particularly in respect to their solvency margins and the extent of their catastrophe reinsurance protection.

Click here to read the Executive Summary of Guy Carpenter’s report: Global Reinsurance Outlook: Points of Inflection; Positioning for Change in a Challenging Market >>

Click here to register to receive e-mail updates >>

AddThis Feed Button
Bookmark and Share

Related Posts