Personal accident programs in the United States sustained modest decreases year over year at the January 1, 2011 reinsurance renewal. International treaties, however, saw considerable fluctuation in subject risk due to currency exchange rates, but rate on line tended to be stable, only being pressured on real changes in the underlying exposure.
Several buyers re-evaluated their programs with many making significant changes to their program structures. Insurers with plenty of capital increased retentions. Alternatively, coverage was very affordable and in a market where deep discounts were harder to achieve, a common strategy was to keep expenditure the same and add coverage. This could take several forms, including increased limits, lower retentions overall or in specific regions, and new covered business or territories. The largest program in the market retracted, while others grew the size of their coverage.
Some programs included high layers that respond only to the nuclear, biological and chemical (NBC) peril. The rationale is that NBC losses are the most likely reason those layers could attach, so why pay for other perils? Reinsurers responded with significant discounts, suggesting a differing opinion of x-NBC peril for upper layers, or a strong appetite for x-NBC coverage in their portfolios.
Overall market capacity, new capacity seeking shares in existing programs and a benign loss year across the board combined to continue cedent-advantaged market dynamics. However, it seems that many programs have started to approach minimum rate on line thresholds that markets are resistant to cross, and we are seeing some effects of that. Decreases are more modest than in past years and quoting markets are being disciplined - stepping out of the most aggressively priced covers. However, where markets like the price, they are generally offering full lines, creating a challenging dynamic with a very fine line between a program being unfilled and oversubscribed.
Buyers looking for the largest capacity have the most difficult time finding discounts at this renewal and are welcoming the new market entrants to give them options.