In 2010 Korean property programs were impacted by Typhoon Kompasu, which hit the northern regions of South Korea in early September 2010. Most insurers suffered losses to the first layers of their property catastrophe excess of loss treaties and in some cases the claims ran into subsequent layers.
For the largest companies in the Korean market, retained natural perils growth was fairly stable, ranging from an increase of 10 percent to a decrease of 10 percent, with an average increase of only 2 percent to 3 percent. In spite of this low aggregate growth, many of the large per event programs saw rate increases in excess of 15 percent. Model changes had a small impact on rate increases in the lower layers of programs. The driving factor in the rate movements appeared to be twofold:
- Prior year rate reductions. Although rates have been decreasing steadily since 2004 following significant increases in the aftermath of typhoons Rusa (2002) and Maemi (2003), the rate of decline had been even more pronounced since 2007, following several years without catastrophe loss activity.
- Overseas exposures. Non-domestic coverage is a common feature of the non-proportional treaties of the larger insurers that have branches located overseas. In 2011, increasing reinsurer focus has been placed on the aggregate growth in these regions as well as on the inclusion of non-Korean interests abroad under domestic treaties.
Additionally, some of the largest reinsurance purchasers in the Korean market increased maximum risk retentions and, as result, purchased higher limits for both per risk and per event treaties. Deductibles, for the most part, remained unchanged from 2010.
In contrast to the rate movements of the property per event programs, the majority of per risk treaties continue to secure reductions in rates, with renewals in the range of flat to down 5 percent. It is worth noting, however, that in some instances where increased retentions have led to increases in estimates of net retained premium income, these rate reductions still result in significant premium increases in monetary terms.
For property proportional treaties, renewal terms have been relatively unchanged from the prior year, although there also have been some requests for small improvements in terms such as increased event limits and commissions.
In addition, there also were some noteworthy shifts in lead reinsurers throughout the course of the 2011 renewal. This was in no small part due to the disturbance in renewal negotiations caused by the earthquake and tsunami in Japan. These events slowed the quotation process and impacted reinsurers’ expectations to vastly different degrees.