In Australia and New Zealand, reinsurance rates trended up slightly for loss-free programs, with those affected by losses sustaining higher increases. Few programs avoided losses, given a busy catastrophe year for the region. Those that did remain loss free saw risk-adjusted reinsurance rate increases of 3 percent to 5 percent at the January 1, 2011 renewal, while those with losses experienced increases of 10 percent to 15 percent on a program-wide basis. Specific layers affected had even higher rate changes. Per risk working layers and high risk excess programs were generally flat.
There was much natural catastrophe activity in the Australia and the New Zealand region in 2010, with three events - the Melbourne hail storm, Perth hail storm and Christchurch earthquake - each generating insured losses of above USD1 billion. Each loss impacted both insurers and reinsurers and in some cases, the damage is still being assessed. Insured losses from the Christchurch earthquake alone could reach USD4 billion.
Both aggregate and premium exposure base grew around 6 percent in 2010, with premium levels slightly above aggregate levels due to original rate increases beginning to gain traction in the region.
Capacity was more than adequate at the January 1, 2011 reinsurance renewal and was sourced from all major markets for catastrophe business. Those reinsurers that were local, had ratings of AA- or better or had more favorable rates dominated non-catastrophe placements. There was pressure on net retentions this year, as reinsurers wanted to move away from attritional loss levels, preferring instead to be in the range where modeled perils constitute their key exposures.
For per risk programs, smaller markets sought multi-year contracts, a viable option given the competition for such placements’ programs. The motivation was to respond to opportunities in an over-supplied market.
For proportional treaty, cedents were willing to retain more risk in order to increase net earned premium levels. In other cases, loss-affected programs were unable to secure capacity. Commissions were affected heavily by loss experience, with loss-free and long-standing profitable accounts continuing to achieve improved commission terms. Loss-affected programs were flat at best.
A rationalized market environment and strong economic conditions have led to market stability in China. Primary rates remained stable, though those for engineering have increased. For catastrophe lines, high economic losses from the floods in the middle of 2010 - reaching USD51 billion - did not have an impact on insurance and reinsurance rates: a low level of insurance penetration kept insured losses contained. A late renewal season saw catastrophe buyers looking for reductions in the range of 5 percent to 15 percent. Capacity was generally plentiful for excess of loss placements. Renewals of property pro rata treaties are always the subject of detailed negotiations: in the end commissions largely remained at expiring levels while increases have been achieved for a few better performing programs. Capacity for these is stable with modest increases for some programs. For the coming year, look for further increases in insurance penetration, as a decade-long trend of 20 percent annual premium growth appears likely to continue. Insurance growth should be matched by accompanying rises in demand for reinsurance.
The sole renewal date for India is April 1, with the exception of the National Reinsurer (GIC) which renews at May 1. The non-life sector in India is expected to grow around 20 percent for the fiscal year ending March 31, 2011, with the automobile and health segments providing the major impetus. Momentum is likely to continue after that, albeit at a slower pace. For the first six months of the fiscal year, the general insurance segment grew 22 percent, with the subsequent fiscal year to post growth of approximately 15 percent.
Loss-free catastrophe programs secured rate decreases of 5 percent to 15 percent (risk-adjusted) on average at the January 1, 2011 reinsurance renewal in Taiwan. Loss-affected programs were flat to down 15 percent, as well. Per risk working layer rates were up 5 percent to 25 percent for loss-affected layers, depending on experience, and down 5 percent to 10 percent for those that were loss free. High-risk excess program rates were flat to down 5 percent in Taiwan.
Subject base exposure increased 20 percent to 30 percent year over year, but premium income has declined 15 percent to 20 percent because of deregulation. The Insurance Bureau in Taiwan has begun to implement enterprise risk management (ERM), and each company is required to report its 2011 risk appetite. There are also preparations for Solvency II on the horizon.
Capacity increased from USD3.1 billion last year to USD3.4 billion at the January 1, 2011 reinsurance renewal - a gain of around 1 percent. Some of this was due to new reinsurance capacity, such as the establishment of new Lloyd’s syndicates in Singapore. More local reinsurers purchased retrocession cover. Capacity was adequate to meet demand.
Structurally, most companies maintained their catastrophe deductibles, and there was a tendency to purchase additional earthquake layers, depending on renewal pricing for expiring structures and 2011 reinsurance budgets.
Most cedents maintained their proportional treaty structures at the most recent renewal. Reinsurance commissions fell 3 percentage points to 8 percentage points for treaties that had loss ratios of above 80 percent. They stayed flat where loss ratios grew by less than 15 percent.