Generally, reinsurance rates were flat to down slightly in Portugal at the January 1, 2012, renewal, even with cedents hit by increased mid-sized claims frequency. Capacity was sufficient at the renewal.
In the primary market, property industrial, commercial and private insurance rates were flat in 2011, with motor flat to up 5 percent and workers compensation flat to down 5 percent. The M&A market was relatively quiet (with only one transaction), although future consolidation could occur because of the long-term effects of the European financial crisis and the advent of Solvency II.
Further economic deterioration may occur in Portugal in 2012. Gross domestic product fell at an estimated 1.6 percent in 2011, and the forecast for 2012 is a decline of 3.2 percent. Unemployment is expected to increase from 12.5 percent in 2011 to 13.8 percent in 2012. As a result, the non-life insurance industry is expected to fall from EUR3.9 billion to EUR3.7 billion (a decline of 5 percent).
Cedents were affected by a salient increase in property claims frequency of medium size. Pricing between the primary and reinsurance markets was not misaligned, with the possible exception of motor, as the reinsurance community continues to be concerned about judicial inflation for bodily injury claims.
For loss-free catastrophe excess of loss programs, the average ROL change at the January 1, 2012, reinsurance renewal was an increase of 3 percent, with no programs affected by losses. Structures, generally, did not change.
Per risk excess of loss working layer program ROLs were down 2 percent, with motor essentially flat. Market capacity was stable.
Proportional treaty retentions were generally stable, and for ceding commissions, cedents sought improved economic terms but tended to be refused by reinsurers. Proportional capacity was stable (with a lone exception), and markets were much less willing to write business without event limits.