Convergence helped stabilise rates in Asia

Healthy levels of reinsurance capacity combined with the convergence of traditional and alternative sources of capital helped keep rates stable in the recent April 1 renewals – a significant renewal date for the Asia Pacific region.

That was one of the conclusions of a report by Guy Carpenter issued this week. It said that non-traditional capacity now represents some 14 per cent of the global property-catastrophe capacity.

Reinsurance pricing in Asia generally stabilised or fell marginally, the report said, as the markets reversed some hardening that had occurred in the wake of the Tohoku earthquake in Japan and Thailand flooding in 2011.

Rates did increase in South Korea, however, following a turbulent year with the impact of three typhoons.

“The April 1 reinsurance renewal saw pricing stabilize in most regions as insurers benefited from an environment of dynamic capital growth,” said David Flandro, global head of business intelligence, Guy Carpenter & Company. “Much of this growth emanated from non-traditional sources, confirming that the convergence between traditional reinsurance and capital market solutions has now occurred.

“Guy Carpenter feels that an accurate understanding of how the market is converging and where the capacity will be deployed is essential to creating new competitive advantages at future renewals,” said Flandro. “This begins with an accurate and rigorous study of the sources and uses of capital, as well as an accurate quantification of available and deployed reinsurance capacity.”