LONDON, Jan. 2, 2014 (GLOBE NEWSWIRE) -- A heady cocktail of converging factors has fuelled a soft buyers' market in nearly all lines of business at the 1 January 2014 renewals, according to the 1st View Renewals Report from Willis Re, the reinsurance division of risk advisor, insurance and reinsurance broker Willis Group Holdings plc (NYSE:WSH).
Challenges faced by both traditional reinsurers and new capacity are myriad. These include rate reductions, new capacity and market entrants, low interest rates, greater retention of reinsurance premiums by large buyers, diminishing reserve releases, expansion in terms and conditions, and increasing regulatory oversight.
John Cavanagh, CEO of Willis Re, commented: "The key influence on the 1 January renewals has been overcapacity triggered by a number of converging factors. Strong 2013 results have bolstered traditional reinsurers' already strong balance sheets. New capital from non-traditional capital market sources has grown to reach US$50 billion. These factors have been compounded by muted demand from buyers arising from the longer term trend of better regulation, which has in turn led to a better understanding and management of tail risk, as well as the trend of major insurance groups to retain more reinsurance premium volume and risk on their own growing balance sheets."
The report also notes that soft market conditions are no longer unique to Property Catastrophe business, with rates down on most lines at 1 January 2014. Pricing margins on excess of loss business have been compressed, and ceding commissions have increased on pro rata treaties for sought after clients with large ceded premium volumes.
Peter Hearn, Chairman of Willis Re, said: "Faced with these market headwinds, reinsurers are adopting a variety of strategies. Larger reinsurers are using their balance sheet strength and technical ability to offer more capacity and more complex, multi-class, multi-year deals. Others are expanding into specialty lines and many have developed multi-channel capacity offerings seeking to use their underwriting expertise to deploy capacity on behalf of capital markets. Additionally, we have seen the rise of pooling arrangements that give smaller reinsurers the opportunity to access business they might not otherwise see in their local markets."
Other findings in the report include:
- 2013's underwriting performance is not reflective of strong market pricing and restrictive terms and conditions, but rather from a paucity of natural and man-made catastrophes: 2013 natural catastrophes were half of what was experienced in 2012
- US property catastrophe loss free reductions of 10-25%
- European property catastrophe loss free reductions of 10-15%
- M&A activity is picking up going into 2014: larger companies are looking to manufacture growth through M&A and strategically challenged companies are beginning to accept that being acquired may be the best option for their shareholders, particularly those backed by venture capital funds
To access a copy of the report, click here.
About Willis Re
One of the world's leading reinsurance brokers, Willis Re is known for its world-class Analytics capabilities, which it combines with its Reinsurance expertise in a seamless, integrated offering that can help clients increase the value of their businesses. Willis Re serves the risk management and risk transfer needs of a diverse, global client base that includes all of the world's top insurance and reinsurance carriers as well as national catastrophe schemes in many countries around the world. The broker's global team of experts offers services and advice that can help clients make better reinsurance decisions and negotiate optimum terms. For more information, visit www.willisre.com.
Willis Group Holdings plc is a leading global risk advisor, insurance and reinsurance broker. With roots dating to 1828, Willis operates today on every continent with more than 17,000 employees in over 400 offices. Willis offers its clients superior expertise, teamwork, innovation and market-leading products and professional services in risk management and transfer. Our experts rank among the world's leading authorities on analytics, modeling and mitigation strategies at the intersection of global commerce and extreme events. Find more information at our website, www.willis.com, our leadership journal, Resilience, or our up-to-the-minute blog on breaking news, WillisWire. Across geographies, industries and specialisms, Willis provides its local and multinational clients with resilience for a risky world.