Catastrophe excess of loss ROLs were flat to up 5 percent in France at the January 1, 2012, reinsurance renewal. Per risk programs - both working layer and high risk excess - were flat year over year, largely because of primary market dynamics.
Faced with a deterioration of loss activity in both property and motor, primary companies increased pricing. Increases ranged from 2.5 percent to 4 percent for motor and 3.5 percent to 7 percent for homeowners. Carriers also continue to underwrite commercial risks carefully, generally preferring to cancel policies rather than not be able to increase prices. For 2012, due to increases on average claims and inflation observed in 2011, rate increases are likely in the primary market.
Exposure premium has increased as a result of primary market rate increases in 2011 by slightly below 5 percent on average. Companies are showing relatively stable exposures compared with last year. Major changes are being driven by the reassessment of both the amounts insured and their quality. (In the past, for example, there were missing policies, mostly on multi-site industrial and commercial.)
With all French excess of loss programs loss-free in 2011, average ROLs were flat to up 5 percent. The release of RMS v11 has had implications on lower layers - mostly on second-loss covers but on aggregate covers as well - due to a higher modeled frequency of small-to-medium sized events. Yet, most reinsurers have downplayed the impact of RMS v11, preferring to use RMS v9 and RMS v10 results.
Some reinsurers have reduced capacity while others have shown increased appetite. Overall, capacity available for the French market has reduced slightly.
Per risk programs were flat at the January 1, 2012, reinsurance renewal, and subject premium was higher than last year as a result of tariff increases in the primary market. Reduced reinsurance rates, however, compensated for them. This also was the case for high risk excess programs.
Per risk programs continue to attract a lot of capacity, as they were seen as an opportunity to diversify reinsurer portfolios. Existing reinsurers were able to maintain market share since, historically, many have invested considerable time and resources to access these treaties.