David Rains, FSA, MAAA, Managing Director and Head of the Life, Accident and Health Specialty Practice and Dean Kidd, Managing Director
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There’s no single answer to the question of capital availability in the global life, accident, and health (LA&H) market. Reinsurers are responding to the returns possible for specific risks, which is driving their capital allocation decisions. Meanwhile, cedents are uniformly focused on managing the cost to transfer risk. As these factors converge on reinsurance rates — along with concerns about investment asset performance, geography, and the underwriting profitability of other lines of business — the result is a price stalemate caused by competing pressures of comparable strength. Without an unexpected market development, the norm is likely to persist.

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Ed Fenton, Managing Director
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Japanese Interests Abroad Excess of Loss

Over the long term, companies are likely to continue to buy combined domestic and overseas programs in order to build their risk capacity. In fact, there are few standalone Japan Interests Abroad (JIA) treaties on which to build a view of market trends. In a tightening market, reinsurers are always sensitive to worldwide exposures within treaties, and there was evidence of this factor affecting the marketing of some treaties, especially if there were large increases in the proportion of overseas exposures. It was a better year than previous in terms of loss activity, and the renewal was successfully completed with few changes in structure.

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Given its catastrophe characteristics, the pricing of Japanese PA programs is mainly based on earthquake scenarios. Therefore, price developments are correlated with the movement of earthquake aggregates. Rates remained mainly stable, ranging from -5 percent to 5 percent.

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Ed Fenton, Managing Director
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Reinsurance rates generally increased in Japan at the April 1, 2009 renewal. Specific changes, however, varied by line of business. There was not a substantial shortage of capacity, though conditions were tighter this year than at prior April 1, 2009 renewals. These conditions are consistent with worldwide reinsurance rate and capacity trends.

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David Rains, FSA, MAAA, Managing Director and Head of Life, Accident & Health Specialty
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Life and personal accident (PA) reinsurance renewals sustained significant rate reductions at the April 1, 2009 renewal — in some cases as low as 10 percent. Average rate on line (ROL) was down 3.8 percent, excluding programs with large rate changes for reasons not directly related to market conditions. For example, companies with reduced subject risk due to the impact of the global financial crisis had ROL reductions that were even greater. Even layers with light losses were treated gingerly, with level pricing or slight increases year-over-year. The markets remains tipped to the advantage of cedents, despite broader market conditions that might be expected to push prices higher.

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David Rains, Managing Director
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Rates on line (ROLs) for the life and personal accident (PA) catastrophe reinsurance market dropped 1.5 percent on average. Seventy percent of layers had decreases year-over-year, and cedents taking advantage of private layer strategies enjoyed the greatest price reductions. At the other end of the spectrum, the highest ROL increases tended to be driven by loss history or the need to replace a financially impaired reinsurer.

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Shaun Scade, Managing Director
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The non-U.S. personal accident (PA) market was not isolated from the effects of the global financial catastrophe. The January 1, 2009 renewal was framed by discussions concerning the cost of capital, liquidity, and investment returns. Reinsurers generally initiated these conversations with the hopes of using asset impairment issues to secure better pricing. Nonetheless, cedents were able to resist rate increases-for some lines, rates even dropped slightly.

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