Guy Carpenter reports that the reinsurance sector enters 2013 equipped with ample dedicated capital and stable pricing. In its 2013 global renewal report, The Route to Profitable Growth, Guy Carpenter finds that the January 1, 2013 renewals took place against a stable backdrop, with only loss-affected lines and select regions experiencing price volatility. The market was supported by a combination of factors including lower than normal catastrophe losses during the first nine months of 2012, new reinsurance capacity and record-high levels of capital.
The Guy Carpenter Global Property Catastrophe Reinsurance Rate on Line (ROL) index fell marginally at the January 1 renewals, indicating a global market with capacity appropriate to meet demand. Any upwards pressure on property catastrophe pricing generally came from programs impacted by Superstorm Sandy in the U.S. and other smaller, local events. Programs not loss impacted were overall flat to down. Price movements for non-catastrophe lines were also mixed, with marine and energy lines seeing noticeable rate increases while many other lines experienced reductions.
Fully dedicated reinsurance capital rose to record levels during the first nine months of 2012. Although Sandy’s late landfall along the northeast U.S. coastline pushed global insured losses to more than USD50 billion in 2012 and likely caused capital levels to stagnate in the fourth quarter, losses were significantly less than the USD120 billion sustained in 2011.
“The January 1, 2013 renewal was very orderly as catastrophes had only local impact,” said Lara Mowery, Global Head of Property Specialty, Guy Carpenter. “One area of ongoing development was growth in the number of participants and capital provided by non-traditional markets, a critical factor in the marketplace’s continuing evolution. Even insurers who do not directly utilize non-traditional sources benefit as reinsurers further leverage this capacity.”
The Route to Profitable Growth
The challenges of weak economic growth, lower investment returns and reserving adequacy remain. Risk carriers require sophisticated solutions to identify, mitigate and transfer an evolving range of risks to overcome these issues. In The Route to Profitable Growth, (Click here for Executive Summary) Guy Carpenter identifies six key areas carriers can explore to help enhance profitability in 2013 and beyond. These include optimal capital management, clear and consistent communication to rating agencies and regulators, appropriate domicile selection and capital markets opportunities.
“The sector continues to show strong resilience,” said David Flandro, Global Head of Business Intelligence, Guy Carpenter. “Over the last five years, insurers have had to respond to financial crises, falling investment yields and increasing international losses. In this environment, it is imperative that insurance company managements have access to the best solutions and opportunities. Guy Carpenter has a long history of creating value for our clients and we are committed to providing innovative solutions for profitable growth.”