Unholy alliance takes its toll on casualty reinsurance: Brit

The unholy alliance of reducing primary rates and broadening coverage combined with weaker reinsurance terms is taking its toll on the casualty reinsurance market.

This is the opinion of Simon Bird, head of casualty treaty at Brit. He added that reinsurers should be concerned that the margins in casualty business have “all but disappeared”.

On a more positive note, he said: “The tendency to self-retain (whether by increasing retentions or by dropping programmes completely) has somewhat abated as cedants have appreciated that the cost of reinsurance has lessened.”

Bird added that reserve releases have continued to surprise observers given the seemingly constant ability to find money from earlier, better priced years.

“However, whilst business written in 2009/2010/2011 will have been generally profitable - benefiting from the aftermath of the global financial crisis which prompted underwriting discipline and portfolio de-risking - the same cannot yet be said of 2012/2013/2014, which have seen considerable weakening in terms and remain unproven in terms of loss experience,” he said.

According to the Brit executive, the favourable combination of “catastrophe margin release from the current year coupled with reserve release from previous years cannot last for ever and is hardly guaranteed!”

He expects P&C rates to be broadly flat, with increases in exposure warranting increases in price. Bird added that “whilst rate reductions should only be conceded in compelling circumstances (e.g exceptional profitably) as reinsurers have made routine concessions over the last two or three years.”