5 January 2015 News

Reinsurance value hits highest point

The value proposition of reinsurance has never been higher, with reinsurers taking less risk than ever and the price of traditional reinsurance falling.

This is according to Aon Benfield’s January 2015 Reinsurance Market Outlook report, which added that the quality of the financial security for the reinsurance market has never been higher.

“Traditional reinsurers have reached the end of a 15 year journey featuring chronological stages of alternative capital's insignificance, competition and finally disruption. As disruption reigned over the last three renewal cycles, leading traditional reinsurers made material progress to incorporate the value of alternative capital - lower cost underwriting capital - into their client value propositions,” said the report.

Reinsurer capital grew to a record amount of $575 billion, including £62 billion of deployed alternative capacity. The growth rates in reinsurance capital and alternative capital deployed were 6 and 25 percent, respectively.

Aon Benfield said that demand for property catastrophe reinsurance grew at a slightly higher rate in 2014 and at January 2015 than in prior periods. However, the demand growth rate was still less than the growth in catastrophe reinsurance supply.

It added that notably there was growth in demand for multiple year programmes, aggregates, underlying and overlying capacity.

“Continued material progress has been made in improving terms and conditions for cedants. Growth in demand for casualty reinsurance programs has also improved with highly customized structures, terms and conditions - partner selection is highly emphasised by reinsurers and cedants."

“We expect these trends to continue into the April, June and July 2015 renewal cycles. Insurers have the widest selection high quality offers of accretive underwriting capital choices we can recall. Growth and consolidation plans for leading insurers have found complementary support from partners in the reinsurance market - more to come,” said the report.

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