Credit reinsurance rates were flat, which, when applied to a rising income base and exposures that were up approximately 20 percent, resulted in a marked reduction in a rate (premium) on exposure measurement. Other than some relatively isolated incidents, an absence of major losses hitting excess of loss covers sustained successive years’ premium reductions. The vast majority of reinsurance is transacted on proportional basis and there have been significant increases in ceding commission. Some markets saw a third successive year of ceding commission increases.
Capacity in the credit reinsurance sector remained abundant - not surprising in an environment of vintage loss ratios and the relative unattractiveness of other classes. The abundant capacity can also be attributed to a successful weathering of the global financial crisis by the credit class. Terms and conditions generally held with only slight loosening to include peripheral sub-classes.
Subject premium bases were generally up over those of the July 1, 2012, renewal, which reflected an overall increase in underlying trade activity. However, this was countered by an even greater increase in exposures that were the consequence of underlying original rates declining.
Primary rates recently stopped their three year pattern of reductions, with the prospect of another recessionary period, concerns for European sovereign debt and political inertia on both sides of the Atlantic contributing to this. Limit discipline appeared to have remained quite strong with most portfolios showing slightly increased quality of exposures in the last 12 months.
Reinsurers were concerned with the ability of primary credit insurers to react nimbly and appropriately in the event of a widely expected worsening global economic picture - Eurozone issues, political inertia in the United States due to the November elections and worrying signs of the world’s economic engines (BRICs) starting to splutter.