With no major catastrophes in Switzerland in 2011 and only a handful of small regional events, reinsurance rates for loss-free programs at January 1, 2012, remained flat to down 8 percent. In the Swiss primary market, overall growth was flat despite commercial and industrial business experiencing rate decreases of up to 10 percent year on year. In 2012, competition on the industrial side is expected to remain fierce.
While there was little M&A activity in the primary market, companies did engage in the selling of individual portfolios and used released capital to reinvest in their core business. Some of these portfolio sales were driven by the Swiss Solvency Test (SST), which became mandatory for all Swiss companies on January 1, 2011.
Both property catastrophe exposure and property per risk exposure were flat to up roughly 10 percent due to the inclusion of additional portfolios under group programs. In terms of structural changes, there were some moves to increase retentions under group programs, mainly as an effort to achieve cost savings.
Recent catastrophe model changes had only a moderate impact on pricing since most large reinsurers use their own in-house models, either exclusively or in combination with commercially available models.
Capacity in Switzerland was ample at the January 1, 2012, renewals. Bermuda-based markets as well as syndicates from the London market opened shops in Zurich in the last year, while Asian reinsurers explored opportunities for diversification.
Rates for per risk high risk excess programs remained flat. When including subsidiaries, the exposure base widened and resulted in rates slightly increasing or decreasing by as much as 10 percent on a risk-adjusted basis.
In the proportional treaty market, retention levels and capacity held steady. Commission levels increased due to favorable performance of underlying business.