Cedants expect cat rate cuts
Insurance buyers can expect European reinsurers to be flexible on rates in the January renewals, which are likely to be defined by mid-single digit risk-adjusted decreases for property-cat business, Alkis Tsimaratos, managing director and head of EMEA West/South operations at Willis Re, told Baden-Baden Today.
The European property-cat market has been operating in a benign loss environment, he explained, which has put increased pressure on property-cat rates. And he describes the flat rate environment as a ceiling, rather than a floor.
“I expect rates to go down by single digits – anywhere between flat and -10, though would be exceptions - depending very much on how much money there is on the slip. The money on the slip will be a big driver of how much risk-adjusted decrease you can get,” said Tsimaratos.
He suggested there are already quotes coming out of France and Belgium that are signalling flexibility ahead of the January 1 renewals.
“As we entered Monte Carlo, the overview of the reinsurers’ results was telling us that the cycle is over, that there’s a new norm. We moved out of Monte Carlo with more flexibility than we had anticipated,” he said.
Tsimaratos said the magnitude of losses in the US last year has posed questions about how Europe would adjust its property-cat rate, but the discourse is now changing.
“If anything, Europe went flat to plus 5 percent up, without any justification other than the losses in the US,” he said.
But he noted that many clients’ reinsurance programmes in EMEA have been without losses for a number of years. The bigger events that have happened over the last five years—for example the ‘Beast from the East’ in the UK, floods in France and mid-sized earthquakes in Italy—have mostly been absorbed by insurers.
On this basis, clients expect to go back to a more flexible market, and Tsimaratos is not seeing any pushback but, rather, a lot of appetite from reinsurers.
“It boils down to a discussion with a couple of leaders in the programmes to see how much willingness they have to accommodate for improved terms. While they won’t be completely happy with that, they will shrug and look at the broader relationship with the client and go for it,” he said.
