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Market Update
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International - Reinsurance
Printable Version
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The talk at Monte Carlo Rendez-vous this year was “steady as she goes.” The calm
seas of a stable and mostly flat renewal season looks set to provide clients and
cedants with safe passage despite low investment returns and a far-from-certain
global economic outlook.
The main points to emerge from the gathering were that the market appears to be
in good health, sufficiently capitalized, well-resourced, and well -placed to manage
clients’ exposures in a cost-effective way.
There has been no major “event” or new aggregated pool of losses that could act
as a rate-hardening catalyst. Losses from the Credit, Aviation, and D&O markets
have already been well documented, and capital to these areas will naturally be
allocated more cautiously.
So far, we have seen a relatively quiet hurricane season in terms of reinsurance
losses. But El Nino activity in the Pacific has produced some damaging storms
(though limited in number).
Traditional reinsurance continues to remain very much in demand, but capital
market products are still looking expensive.
Despite the calmness at Monte Carlo, there has been market movement this year that may still have more profound effects later. For
example:
| 1. |
A number of new players and reinsurance teams have taken up residence in Lloyd’s, such as Novae Re and Max Re, and there is
new capacity elsewhere—largely by way of expanded locations by Lloyd’s and Bermudan groups. |
| 2. |
There has been some reinsurer consolidation with Partner Re purchasing Paris Re and IPC Re being acquired by the Validus
group. |
| 3. |
Switzerland (and Zurich in particular) continues to expand as a major reinsurance hub. |
| 4. |
Reinsurer results for 2009 will be affected by investment losses and difficulties in managing currency volatility. |
| 5. |
Swiss Re has significantly reduced its capacity for credit reinsurance. |
Looking toward 2010, the likely outcome is that reinsurers will pick and choose, and individual reinsurance programs will be rated
on their merits. In such an environment it becomes increasingly important that cedants make the right choice when they explore the
broker options available, which were reduced significantly earlier this year following the Aon Benfield merger.
Brokers outside the dominant three will be looking at how they can help reinsurers achieve a broader distribution of business.
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Please contact your Lockton Representative for further information regarding any information contained in this
market update.
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