Signs of pricing stabilisation emerging: Willis Re

Signs of reinsurance pricing stabilisation started to emerge in peak property catastrophe zones during the June and July renewals.

This is according to Willis Re in its latest 1st view renewals report, which added that this is partly the result of a $4 billion plus increase in demand for Floridian catastrophe capacity.

The stabilisation was also driven by an abatement of insurance-linked securities (ILS), with a number of markets now showing “pricing discipline by cutting the capacity they are prepared to offer as rates continued to soften throughout the first half of 2015”.

However, the recent mergers and acquisitions (M&A) frenzy continues to heat up and  “despite the unappealing short-term outlook for nearly all reinsurers, M&A activity is helping to maintain the current high valuations”.

The report added that some of the M&A activity is creating unexpected combinations which make it difficult for reinsurance buyers to judge the value to them over the medium-to-longer-term of some of the potential merged entities.

Looking ahead to 2016, John Cavanagh, global chief executive office of Willis Re, said: “The June 1 and July 1 2015 renewal season offers reinsurers some hope. With the North Atlantic Hurricane season now underway, even if the predicted low level of hurricane activity is realised, the outlook for 2016 might not be quite as bleak as may have been inferred from the January and April 2015 renewals.”