Buyers managed to improve terms and pricing in the year-end renewals, with pricing stabilisation remaining a major challenge for re/insurers, according to the latest 1st View Renewals Report from Willis Re.
The report said that this is partly because, despite pressures, the global reinsurance market remains on track to close out another profitable year.
According to the report, while there are signs that reinsurers are not prepared to be as flexible as earlier years, many buyers have yet again managed to obtain improved terms.
The report suggested that while sizeable reductions have been obtained on international business, in the US there are signs of more stability, driven by the capital intensive nature of some US classes and the very significant improvements in terms in recent years.
It also noted that the capital markets have been active, leading to a further compression in margins, particularly on recent catastrophe bond issuances but also on a wider range of collateralized placements. Investor appetite continues to expand, most recently in motor, where issuers now have demonstrable access to alternative sources of capital.
“Reinsurers are taking a stronger client-centric approach to managing their portfolios in the current market; this is leading to superficially inconsistent underwriting at a market level and fragmentation of pricing trends by territory, class and client,” the report said.
John Cavanagh, global CEO of Willis Re, said: “The ability to produce yet another profitable year, somewhat against the underlying pricing models, has meant that the threshold to force a market pricing stabilization has not yet been reached.
“While reinsurers are still able to report profitable results, despite the underlying issues they face, the situation for many primary companies is much tougher.
“Rising combined ratios in many markets, driven by competition both from existing peers as well as from new style competitors utilizing innovative low cost distribution and cost models, is a growing concern.
“With the January 1 renewal season setting the tone for 2017, reinsurers can only look forward to another demanding year, where luck will play an even larger role in determining their final results.”
Willis Re, Reinsurance, Insurance, Global, Renewals report