Reinsurance rates continued to harden following the reduction in excess of loss capacity available, as evidenced in the January 1, 2012, renewals, with periodical payment orders (PPOs) an increasing concern for reinsurers. Rate increases were targeted at the layers excess of GBP5 million, with increases in the 20 percent to 30 percent range the norm rather than the exception.
Following a sustained period of increase, the second quarter of 2012 saw a flattening in original private motor rates. However, commercial rates were still increasing with year on year rate increases in the region of 10 percent.
Significant capacity remained, but there was evidence of a two tier market developing, with some programs potentially having to accept PPO capitalization clauses to ensure completion.
Reinsurers’ appetite for motor pro rata business remained strong, with reinsurers prepared to accept margins in the 2 percent range in order to secure the business.
Across Continental Europe, only very few motor reinsurance treaties renew at dates other than January 1. Conditions for those renewals were stable and followed the trend already seen at January 1, 2012.
At the catastrophe level motor liability reinsurance rates remained at a commoditized low price and unlimited cover continued to be available. Reinsurance rate changes on working layers varied widely in accordance with claims experience. Social inflation, in particular, medical care costs, were still a point of concern in several countries. In certain Eastern European countries the under-estimation of reserves is under focus.
The use of quota share treaties in Germany has been stable with little growth in the run up to Solvency II rollout. It is expected that the increasing rates seen in the last two years will likely create reductions in loss ratios. In some other countries underlying rates were thought to have bottomed out and created pressure on reinsurance rates. In countries where the motor market represents the majority of premium available for casualty classes the competition was still very high.