Willis Re, the global reinsurance broker, has issued a report on the January renewals and the resulting pricing of various lines of reinsurance. The overall view is that prices and costs of reinsurance are rising, particularly in lines of business such as U.S. catastrophe business. The report hints at a resurgence of syndication of risks as cedents seek to diversify their business across many carriers rather than just one, a good thing for the smaller players, niche reinsurers and Lloyd’s market syndicates.
Willis predicts a rise in issuance of catastrophe bonds in 2009 due to issues in retrocessional capacity, restricted options for post-event refinancing and a shake out among investors after the credit turmoil and worries over Lehman. Of course, the other issue that will help spur interest in catastrophe bonds in the hardening of reinsurance prices and the increasing nervousness among cedents who are looking to spread their risk. Could we see a resugence for the capital markets as smaller catastrophe bond issuances are used by those cedents as an alternative place to cede risk to? It would make sense if they are looking to diversify placements and reinsurance prices continue to go up.
You can download the full report from Willis Re here.