Rate softening in the market for non-marine retrocessional reinsurance slowed down at the mid-year renewals, with less acute declines seen than in this years earlier main retro reinsurance renewals, according to broker Willis Re.
Earlier this year at the January reinsurance renewals, retrocessional rates declined by between -5% and -25% across large swathes of the retro market. Now at the latest renewals in June and July, price declines on retro business were more muted, according to Willis Re, with price declines much less steep.
Further rate declines were seen across large parts of the retrocessional reinsurance market, but they were less acute and the softening trend was not so severe as in the primary reinsurance market this time around.
On certain peak zone retrocession accounts there were additional rate reductions of between -2.5% to -5%, compared to January, while some more regional specific programs saw larger price reductions.
That shows, to a degree, that both traditional and non-traditional providers of retrocession capacity are not willing to chase down the large, peak zone or worldwide retro programs to the degree that the primary reinsurance market has declined. This is sensible given the potential for broad portfolio exposure to large events in retro business.
Ample capacity continues to be a feature of the retro market, according to Willis Re, with the market environment seeing capacity driving rates down as well as stimulating some instances of new purchases. However, the retro reinsurance market remains inconsistent, with demand patchy.
Some buyers are capitalising on the competitive retrocessional reinsurance capacity that is available, to increase their protection. Others are more wary, given the uncertainty surrounding signings and the pressure on inwards rates, however these remain under pressure to secure ever more competitive retro pricing going forwards.
The industry loss warranty (ILW) market has something of a resurgence, thanks to the more competitive pricing and ample capacity. Buyers have responded to the attractive pricing as hurricane season approached, resulting in a greater number of completed trades.
The retrocessional reinsurance market remains loosely connected to the broader reinsurance market, however the wide nature of some of the retro protections mean that capacity providers are not prepared to be chased down to the lowest depths of pricing. However further softness could be ahead in retro if the market remains largely free from losses through the rest of 2014 and the January 2015 renewals could see the trend towards declining prices continue.
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