Guy Carpenter & Company, LLC, the leading global risk and reinsurance specialist and member of Marsh & McLennan Companies (NYSE: MMC), reports that reinsurance market rates on line (ROLs) continued to be driven by an influx of capital from third-party investors at the July 1 renewals, in spite of catastrophe losses reaching approximately USD20 billion during the first six months of 2013 (above the ten-year average for the period). In a briefing released today, Guy Carpenter comments that robust catastrophe bond, sidecar and collateralized reinsurance activity throughout the year has for the first time pushed pricing in the capital markets to “decouple” or breakaway from levels set by the traditional market. This has in turn prompted downward pressure on overall traditional market pricing.

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It is worth noting that while the 144A catastrophe bond* market is the most visible component of direct capital markets capacity in the catastrophe risk market, it is not the largest. Other conduits, particularly collateralized reinsurance and sidecar participations are also meaningful as additional sources of risk transfer capacity.

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In general terms primary rates on global marine and energy covers were flat. Despite the relatively recent large losses that occurred even energy rate increases tailed off somewhat. There were no specific moves to increase primary rates, which filtered through to marine reinsurance placements, where individual accounts were treated on case by case bases. There did not appear to be any particular areas where reductions were seen. These only occurred if there were specific extenuating circumstances. Marine ILW contracts were one area where pricing and attachment levels increased, primarily driven by the Costa Concordia loss. The original loss reserve recently increased to the USD1 billion level.

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The run up to July 1 remains a relatively quiet renewal period for catastrophe retrocession in terms of volume of business transacted. The focus is more about new and opportunistic purchases, as clients look to finesse and optimize their purchasing in order to mitigate the effects of the coming US wind season as best they can. However, it is precisely because of this renewal date’s proximity to the wind season that deals purchased at this time tend to be an important indicator of pricing direction and activity.

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Reinsurance renewals took place against a backdrop of plentiful capacity at July 1, 2012. Capital has continued to strengthen through the second quarter of 2012, moderating pricing pressures, according to a briefing released today by Guy Carpenter & Company.

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David Flandro, Global Head of Business Intelligence and Lara Mowery, Head of Global Property Specialty
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The upwards pricing movements seen in the retrocession market during the January 1, 2012, renewals continued into June both in terms of direction and magnitude. Hardening rates reflected the unprecedented run of international losses in 2011 and the continuing uncertainty surrounding ultimate loss numbers from these events, particularly the Thailand floods.

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More moderate pricing trends were evident at the June 1, 2012 reinsurance renewals as the relatively light catastrophe loss activity during the first five months of the year contributed to positive reinsurer results and plentiful capacity, according to a briefing released today by Guy Carpenter.

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In the global property market, several factors affected reinsurance rates at the January 1, 2012, reinsurance renewal. RMS v11 had an impact, as did a very active catastrophe year, with major events occurring around the world. While it is too soon at time of writing to determine where reinsurance rates will settle, initial quotes showed increases on last year’s pricing for loss-free working layers, with those hit by losses quoted even higher in some cases. However, Guy Carpenter hopes to mitigate these initial price rises, along with increased client demand, through a combination of new capacity and delivering a wider range of products.

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The run up to July 1 is not traditionally a big renewal period for catastrophe retrocession. It is more about new and opportunistic purchases, as clients look to mitigate the effects of the coming US wind season as best they can. However, it is precisely because of this renewal date’s proximity to the wind season that deals purchased at this time tend to be an important indicator of pricing direction and activity. We have observed that activity within the sector has continued the trend towards rate rises (on both loss-affected programs, and, to a lesser extent, loss-free programs). This activity has been mainly driven by industry loss warranty (ILW) and county weighted industry loss (CWIL) purchases. It must be viewed against a background of significant tornado activity and flooding in parts of the United States and the latest earthquake in New Zealand in June.

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David Flandro, Managing Director, Head of Global Business Intelligence
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Lara Mowery, Managing Director, Head of Global Property Specialty
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Kevin Stokes, Executive Vice President, Head of Florida Business Unit
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The June 1, 2011, renewals took place against the backdrop of record first-half catastrophe losses and uncertainty surrounding the release of version 11 of Risk Management Solutions’ (RMS) U.S. hurricane model. The heavy international natural catastrophe-related losses that occurred during the first quarter of 2011 - combined with the multi-billion dollar losses from tornadoes in the United States in April and May - have added to significant loss activity over the past 16 months, culminating in insured losses of close to USD100 billion.

Catastrophe activity and two major catastrophe model revisions (RMS v11 this spring, which was preceded by AIR v12 last fall) led to a volatile renewal.

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