Benfield, the U.S.-U.K.-based international reinsurance broker and risk intermediary, has issued a comprehensive 82-page report on the current climate in the reinsurance market. The study found that “last year’s unprecedented catastrophe losses had an uneven impact on pricing and capacity at 2006 reinsurance renewals.”
The report, entitled “eSwings and Roundabouts,” unsurprisingly found that the 2005 hurricanes “caused dramatic increases in reinsurance rates in the USA, particularly for Property Catastrophe business in loss-affected areas and in the non-Marine retrocession and Marine reinsurance markets.” Benfield notes, however, that “elsewhere the hurricanes had a generally stabilizing influence, reversing the downward price trend.”
“The immediate impact of the hurricane season fell short of the market changing event some expected,” observed Benfield Chief Executive Grahame Chilton. “However we believe that the market has changed. Continuing development of 2005 losses, recalibration of catastrophe models and the shrinking appetite for peak exposures are some of the factors which will exert further upward pressure on pricing.”
Chilton sees a much tighter market. “Reinsurance capacity is likely to be significantly tighter for 1 July renewals and beyond and this is likely to lead to a general re-rating across global markets,” he stated.
Among other conclusions in the report, Benfield indicated that “loss affected property catastrophe treaties in the USA experienced the most substantial price increases, of more than 100 percent in some cases. Loss-free property business in the USA was up 10-20 percent, compared with price falls of up to 20 percent in January 2005. In Latin America and Caribbean, Western Europe, Australia and Central and Eastern Europe there were swings from price decreases in 2005 to either flat or low double-digit growth.”
Benfield issued the report following a “worldwide post-renewal survey of Benfield brokers conducted during the past two weeks.” It concludes that, “cost was the primary concern for 33 percent of reinsurance customers, with security and ratings (27 percent) and coverage, terms & conditions (23 percent) also significant issues.
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