Guy Carpenter & Company, Inc., MMC’s reinsurance brokerage division, announced the release of its annual, comprehensive study of the property catastrophe reinsurance market, “The World Catastrophe Reinsurance Market: 2004.”
The report covers over 20 countries and regions estimated to comprise more than 90 percent of the worldwide market for catastrophe reinsurance.
The announcement noted that among the report’s key findings were the following:
— Pricing for catastrophe property reinsurance declined in most countries in 2004. The index of global rate on line fell by 8.7 percent from the peak of 2003. This decline follows an upward trend in pricing that began in 2000 and was accentuated by the enormous losses of September 11, 2001.
— In general, reinsurers at 2004 renewals were competitive, and aggressive in pursuing business that was perceived as adequately priced.
— The current price cycle in catastrophe reinsurance pricing appears to be less volatile than the price cycle following Hurricane Andrew in 1992, with more moderate rates of change in the hard phase and the soft phase of the cycle thus far.
— Looking ahead to 2005 renewals, the current market expectation is for further rate declines and adequate capacity in most markets. This projection assumes there are no mega-catastrophic events in the second half of 2004.
“Both supply and demand expanded in 2004, but as increasing supply surpassed rising demand, prices fell,” commented Sean Mooney, Guy Carpenter’s Chief Economist. He also noted: “The overall cost of catastrophes in 2003 was about average when compared to the losses over the past 15 years. As a result, catastrophe losses did not play a major role in the pricing of 2004 renewals in most markets.”
The bulletin noted that the report was compiled “”before Hurricane Frances made landfall in Florida, recent Atlantic hurricane activity, excluding any potential losses from Hurricane Ivan, is not expected to have a meaningful impact on the January 2005 renewal season, with the exception of some isolated cases.”
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