April 22nd, 2013

Reinsurance Pricing Trends

Posted at 1:00 AM ET

Here we review recent GC Capital Ideas posts that have focused on 2013 reinsurance pricing trends.

April 1 Renewals See Reinsurance Pricing Stabilize Amid Dynamic Capital Growth: Guy Carpenter reports that dynamic capital growth and ample reinsurance capacity resulted in a relatively stable renewal at April 1, 2013. In a briefing released today, Guy Carpenter comments that the convergence of traditional and alternative capital sources is changing the marketplace, with non-traditional capacity now making up an estimated 14 percent of global property catastrophe limit.

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Japan Values Long-Term Continuity: As in every past year, Japanese (re)insurers look to the January 1, 2013, reinsurance renewal for guidance as to the likely state of the market for their renewals at April 1. This year they will have been encouraged with a market characterized by excess capital, overcapacity and easing prices for loss-free business. This scenario is evidenced by the Guy Carpenter Global Property Catastrophe Reinsurance Rate on Line index, which fell at renewal, albeit marginally. This environment will come as a welcome change to Japanese buyers, who have fought their way through the last two renewals against adverse market conditions caused by a series of significant losses in the Asia Pacific region.

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Chart: Guy Carpenter Regional Rate on Line Index, January 2013: There was variation regionally in the Guy Carpenter Regional Property Catastrophe Reinsurance Rate on Line (ROL) index. U.S. property catastrophe pricing was most affected by the landfall of Superstorm Sandy while other regions were flat to down.

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Chart: Guy Carpenter Global Rate on Line Index, January 2013: The Guy Carpenter Global Property Catastrophe Reinsurance Rate on Line (ROL) index fell marginally at the January 1, 2013, renewal. This is the seventh consecutive annual renewal in which changes to the index have equaled 10 percent or less, indicating a global market with capacity appropriate to meet demand.

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January 1, 2013 Renewals Bring Stable Reinsurance Pricing: 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.

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