November 21st, 2011

Review of Top Reinsurance Renewals Stories in 2011

Posted at 1:00 AM ET

As 2011 winds down and we head into the January 2012 renewals, here we offer a retrospective of the top GC Capital Ideas stories of 2011 covering the year’s renewals.

1. Reinsurance Market and Rate Direction Still in Transition At April 1, 2011 Renewals: With substantial first quarter insured losses from catastrophes in Australia, Japan and New Zealand and the political unrest in the Middle East and North Africa, the direction of global reinsurance rates at April 1, 2011 renewals varies by region and line of business. Guy Carpenter & Company released its annual report on the state of the reinsurance market at the April 1 renewals period. As the quarter comes to a close, it is the most costly first quarter on record for the industry.

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2. Wide Range of Outcomes Seen in June 1, 2011, Florida Reinsurance Renewals: ┬áThe June 1, 2011, renewals took place against the backdrop of record first-half catastrophe losses and uncertainty surrounding the release of version 11 of Risk Management Solutions’ (RMS) U.S. hurricane model. The heavy international natural catastrophe-related losses that occurred during the first quarter of 2011 - combined with the multi-billion dollar losses from tornadoes in the United States in April and May - have added to significant loss activity over the past 16 months, culminating in insured losses of close to USD100 billion.

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3. Chart: Guy Carpenter Global Property Catastrophe Rate on Line Index: Early predictions that January 1, 2011 reinsurance renewal rates were likely to fall have been proven correct. The Guy Carpenter Global Property Catastrophe Rate on Line (ROL) Index lost 7.5 percent - the second consecutive annual decline. Contributing to this move has been a combination of factors, including moderate loss activity and abundant levels of industry surplus.

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4. Market in Transition at July 1, 2011 Reinsurance Renewals, According to Guy Carpenter: In the first quarter of 2011, the reinsurance sector’s dedicated capital position fell by 4.4 percent to about USD165 billion. In the second quarter, reinsurance capital remained essentially flat and moderately down year-to-date.

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5. 2011 Reinsurance Renewal Rates: United States Property: Rates on line decreased by an average of 7.5 percent on U.S. programs, but there were significant variations depending on cedents’ results, regional characteristics and coverage.

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6. 2011 Reinsurance Renewal Rates: Asia/Pacific: 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.

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7. Chart: U.S. Property Catastrophe Rate on Line Index Update: Chart presents historical pricing activity through July 1, 2011.

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