The hopes that reinsurance prices would stabilise at the key January 2016 reinsurance renewals have been dashed, according to broker Willis Re, with further price declines seen across the bulk of the market.
Speaking to the FT today in advance of its main renewals report being published next week, Willis Re International chairman James Vickers said that while there had been hope earlier this year that the worst of the reinsurance rate declines were behind us, the market has seen its hopes dashed and prices continue to fall.
As we wrote should be expected yesterday, rates in the UK and Europe are reported to have been most affected, with the UK seeing property catastrophe reinsurance rates down by -10% to -15%, Europe -5% to -12.5%. The U.S. did see more stabilisation of pricing, but still ongoing declines, witnessing prices falling by -2.5% to -7.5%.
Vickers said that for conditions to change the market needs to see some reinsurers reporting poor results, as until that time the low level of major losses and continued ability to release reserves would likely buoy reinsurance firms results.
However even if results can be maintained, profitability will decline further. The need for traditional reinsurers to remain disciplined and to become more efficient, or gain scale through M&A, will be a constant pressure throughout 2016 once again.
It’s an early indication that the pre-renewal commentary has been largely accurate, with the worst declines seen in regions where competition for diversification remains high.
The ongoing competition ensures another year ahead where the influence of the capital markets on reinsurance is going to be a key topic of focus, as lower-cost capital and efficiency in terms of business model remain key.
We’ll bring you more discussion of the Willis Re January reinsurance renewals report when it is released next week.