Reinsurance Prices Drop at January Renewal Amid Surge of Capital

By Noah Buhayar | December 31, 2013

Global prices for reinsurance policies up for renewal on Jan. 1 declined amid an oversupply of capital in the industry, according to a unit of Marsh & McLennan Cos., the world’s largest insurance broker.

Rates for property-catastrophe reinsurance fell 11 percent, driven by decreases in the U.S., according to an e-mailed statement today from New York-based Marsh & McLennan’s Guy Carpenter division. Prices also fell for most other types of coverage.

Reinsurers such as Munich Re and Swiss Re Ltd. help providers of primary coverage such as American International Group Inc. and Allianz SE shoulder the costliest claims. An influx of capital from investors, strong balance sheets and lower-than-average losses from natural disasters meant that supply often outstripped demand, Guy Carpenter said.

“We have seen a surge in capital, through both alternative and traditional vehicles, over the last two years, which has transformed the nature of the reinsurance sector’s capital structure,” David Flandro, head of business intelligence at Guy Carpenter, said in the statement.

The industry had about $322 billion in dedicated capital at the end of 2013, a near-record level, according to the broker. Global insured losses were about $40 billion this year, $20 billion less than the 10-year average.

(Editors: Steven Crabill, Christine Harper)

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