Zenkyoren sets the tone for April reinsurance renewal pricing

by Artemis on March 19, 2014

According to a report Zenkyoren of Japan has set the tone for the upcoming April 1st Asia-Pacific reinsurance renewals as it added a whopping $3 billion to its catastrophe reinsurance program at reduced risk adjusted pricing.

Zenkyoren, the Japanese National Mutual Insurance Federation of Agricultural Cooperatives, has been the largest single buyer of catastrophe reinsurance coverage for a number of years, with a reinsurance treaty sized between $6 billion and $7 billion dollars in recent years.

The market has been expecting Zenkyoren to increase its limits at this years renewal, as it seeks to fill the retained gaps in its program and to maximise its coverage in the currently attractive reinsurance environment. According to a report from the Insurance Insider this morning, Zenkyoren has done exactly that, to the tune of an additional $3 billion of reinsurance limit bought.

It’s quite astounding that a single reinsurance buyer can bring an additional $3 billion of risk to the market, demonstrating the size and the importance of the Zenkyoren catastrophe reinsurance treaty. Reinsurers will have been delighted to be given the opportunity to grow their Japanese books but Zenkyoren has exacted a cost from them in terms of savings made.

As Artemis wrote just over a week ago, April’s Asia-Pacific reinsurance renewals are set to provide a barometer for the expanding influence of alternative reinsurance capital and catastrophe reinsurance price softening. Of course it isn’t just alternative reinsurance capital exerting pressure on pricing, but it is a key influence which is driving more competitive pricing across the reinsurance market.

According to the Insider’s report, Zenkyoren achieved a risk adjusted price decline of around 10% to 12.5% across its now nearly $10 billion catastrophe reinsurance treaty. The Zenkyoren example shows that prices have definitely softened in Asia-Pacific and it is expected that the renewals will show similar price declines at least for the other large Japanese catastrophe reinsurance programs.

The recent completion of Tokio Marine & Nichido Fire’s Kizuna Re II catastrophe bond at very low pricing also shows that the Japanese reinsurance market, and perhaps the broader Asia region, looks set to experience price declines in the 10% region.

It’s going to be very interesting to read the reports on renewal pricing from the major reinsurance brokers in April to see whether this price softening is as broad as it is beginning to look.

Read our article on the upcoming April reinsurance renewal season: April’s reinsurance renewals to show alternative capitals influence.

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