A soft market squeezing profitability in the insurance and reinsurance market is the biggest concern for executives, according to an online survey conducted among Intelligent Insurer readers.
The re/insurance sector already faced comparatively low rates in 2016, but this has been at least partially offset by a benign large claims environment. But this could potentially be different in 2017, eroding profitability of the sector, which is already under pressure thanks to the low interest rate environment is weighing on investment yields.
“Rates on the retail side have gone from soft to mush, deductibles have dropped & sublimits are given away for market share in retail commercial property policies so that must result in primary carrier rate inadequacy at some point in future,” said Andrew Kiernan from Lighthouse Assurance.
James McAloon at Canopius Syndicate believes that soft prices will be the biggest challenge in 2017 as a consequence of “excessive capacity” in the sector.
In search for higher yields in a historically low interest rate environment, investors have piled into re/insurance, increasing capacity particularly in property/casualty, contributing to a soft market.
The biggest challenges for re/insurers in 2017 will be “soft prices, low profitability, rising claims, new competitors and securing the right talent,” believes Praveen Gupta from Raheja QBE General Insurance. A large number of respondents also believe that decreasing demand and lack of growth opportunities will present a challenge for the re/insurance sector in 2017. Particularly large reinsurers such as Swiss Re have been saying that they will shed business if rates continue dropping and don’t reflect the potential risk of the business.
Swiss Re believes that non-life re/insurance premium will be “modest” in 2017, according to its “Global insurance review 2016 and outlook 2017/18”. Global primary non-life premium growth is forecast to be slightly weaker at 2.2 percent in 2017 compared with 2.4 percent in 2016. While premium growth in emerging markets is expected higher than that at 5.7 percent in 2017, the pricing environment in non-life will remain challenging.
Premium growth is expected “substantially higher” for primary life insurers than for non-life insurers, according to Swiss Re, driven by robust growth of savings products in emerging markets, particularly Asia. Global premiums are forecast to grow by 4.8 percent in 2017.
Lighthouse Assurance, Europe, Andrew Kiernan, Canopius Syndicate, James McAloon, Insurance, Reinsurance, Swiss Re, Raheja QBE General, Praveen Gupta