Reinsurance rates in general were flat in Scandinavia at the January 1, 2012, reinsurance renewal with the exception of catastrophe rates, which increased modestly for loss-free programs and significantly for loss-affected programs. A reduction in capacity for catastrophe business contributed to pricing in the region, whereas the capacity for non-catastrophe business was plentiful. Reinsurance structures were generally unchanged year over year.
In the primary market, there are signs pointing to rate increases following price conditions that have favored original insureds for a while. There were no real upward adjustments in primary rates in 2011, but the decreases have tended to flatten, with upward price pressure on some specific types of risks, such as insurance for larger real estate.
Because the Nordic market is mature and consolidated, there has not been much M&A activity. However, there is a higher degree of start-up activity in Norway than in the other countries in the region, with some smaller insurers taking market share from the larger players.
Pricing for loss-free catastrophe excess of loss reinsurance programs in the Nordic region was up 5 percent to 10 percent year over year. The July 2011 cloudburst in Copenhagen had a significant impact on many Danish and pan-Nordic programs. It was the second-largest market loss in Denmark, with insured losses estimated to be between DKK5 billion and DKK6 billion. Programs impacted by the Copenhagen cloudburst loss increased by 25 percent to 35 percent in price over the 2011 terms. There were no major structural changes to programs. And, the regulatory environment did not have a significant impact on the January 1, 2012, renewal, since Solvency II does not drive reinsurance purchasing in the Nordic region (most cedents already secure sufficient cover to address Solvency II capital requirements).
The release of RMS v11 has had implications for the Nordic region, with the latest version providing higher loss figures in lower return periods and lower results in higher return periods than RMS v9 (with some exceptions for specific lines of business). The greatest changes from RMS v9 to RMS v11 are the return periods for Norway.
Reinsurance rates for per risk excess of loss working layer programs were flat or even down on some programs, whereas rates for high risk excess programs largely remained unchanged. There were no significant structural changes to programs.
Market capacity for the region did decline, which contributed to the slight rate increases. For proportional treaty, there were generally no changes year over year, with commission levels adjusted according to treaty results.