Guy Carpenter claims stable 2016 renewal, but sees challenges ahead
The January 2016 reinsurance renewals were orderly, stable and very business-like, according to Nick Frankland, chief executive officer of Guy Carpenter’s EMEA operations division.
Speaking at a press conference in London, Frankland said that the renewal period had been much as Guy Carpenter had expected following the reinsurance gathering at Baden-Baden.
“Prices were generally lower than previous years, but the decrease was at a lower rate than the previous year,” he said.
“The amount of reinsurance capital was stable, but capacity still exceeds demand and overall more limits were purchased.”
Chris Klein, head of EMEA strategy management, confirmed that rate decreases had slowed a little, going from an average of 11 percent the previous year to 8.8 percent in January 2016. He added that excess capacity remains and that although natural catastrophe losses had impacted the market, losses were 6 percent lower than in 2014.
Klein also said that there had been a certain amount of decoupling of global events. He pointed out that hurricanes Katrina, Rita and Wilma (KRW) had led to a spike in property catastrophe reinsurance rates on line in the US markets in 2005, but that there hadn’t been a similar spike in the UK, Europe or Asia-Pacific. Similarly in 2011 the earthquakes in Japan and New Zealand had caused a spike in Asia-Pacific property catastrophe reinsurance rates on line, but not in the USA, UK or Europe.
Richard Hewitt, head of business intelligence EMEA at Guy Carpenter, said that dedicated reinsurance capital was stable and that the traditional reinsurance market cycle was dead, confirming Klein’s comments about the dislocation of the market that had started with KRW. As a result he said that the market was now turning on a regional basis and no longer responded as a global whole.
Summing up and looking at the coming year, Frankland said that the b ig issues facing the market included capital management, expense control, tiering and consolidation in the form of smaller reinsurers continuing to merge, although he added that he did not think that 2016 would see as much activity as 2015 had.
He concluded by mentioning three additional challenges to the reinsurance industry at the moment. According to Frankland, the insurance gap continues to exist, with a continuing disparity between aggregate losses from events like floods and insured losses. In addition he pointed out that cyber risks continue to be hard to quantify and therefore hard to assess.
Frankland finally pointed out that terrorism coverage now needs to be looked at. He said terror pools had been set up to deal with the kind of losses caused by groups like the IRA, who targeted properties with bombs. However, with the IRA now in the past, more recent terror attacks, such as the Paris shootings and the attacks in Tunisia, had concentrated on individual people and that terrorism coverage needs to be updated as a result.
