Hurricane Sandy helped stabilise renewals

Much lower levels of catastrophe losses in 2012, compared with 2011, has resulted in a stabilisation of rates on property classes and no blanket rate increases at the January 1 renewal, according to a report by Willis Re, which also said that without Hurricane Sandy rates would have softened further.

The report, entitled ‘Reinsurers Clear the Sandy Hurdle’, concluded that international rates for property-catastrophe business were flat to down 5 percent on loss free accounts in the renewals but increased by as much as 10 percent on loss impaired accounts.

It said that losses stemming from natural catastrophes in 2012 were almost half the $120 billion incurred by the industry in 2011, with most reinsurers not facing any material capital impact and remaining within their annual catastrophe budgets as a result.

“In the absence of Superstorm Sandy, reinsurers would have found it difficult to resist buyer pressure for further concessions. As such, Sandy’s impact has helped to stabilize market pricing on an overall basis and reinsurers have largely delivered to their clients in terms of capacity and continuity,” said Peter Hearn, the chairman of Willis Re and John Cavanagh, its chief executive, in an opening letter.

But the report also said that the biggest influencing factor on rates remains the repercussions of the global financial crisis. Investment returns remain low, primary companies in mature markets are struggling to grow and larger insurance groups are restructuring the way they buy reinsurance.