Willis Re 1st View: Rates Soften Across All Lines, With Reductions of Up to 20%

LONDON, April 2, 2014 (GLOBE NEWSWIRE) -- Reinsurance pricing continued to fall almost across the board at the 1 April 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).

Trends observed during the 1 January 2014 renewals continued and showed clear signs of acceleration. Positive 2013 results for traditional reinsurers and a seemingly unabated supply of capital from third party investors have added further to the oversupply of reinsurance capacity chasing muted demand.

John Cavanagh, CEO of Willis Re, commented: "The 1 April renewals have seen a softening of rates across nearly all classes and geographies which, in turn, has allowed buyers to achieve substantial savings in the cost of their reinsurance protections. Some buyers took the opportunity to buy more cover and some renewals saw an expansion in terms and conditions. The overriding target for most buyers, however, was to achieve price reductions or an increase in ceding commissions. Restructuring and consolidation of covers by some of the larger buyers continues to be a trend along with M&A consolidation causing further compression in price in favor of the buyer."

Many primary insurance company buyers, most noticeably international and regional U.S. companies, continue to remain cautious in their use of insurance-linked securities (ILS) and collateralized markets.

Major traditional reinsurers have worked hard to optimize the use of their client relationships, capacity and technical underwriting capability to protect and, in some cases, increase their shares to help withstand the challenges of competing with the ILS and collateralized markets.

These reinsurers have also stepped up efforts to manage their capital through increased share buy backs, special dividends and other techniques. In spite of the softening rate outlook, stock valuations of quoted companies remain attractively high. In fact, a number of companies are taking advantage through public share offerings to provide existing investors with an exit strategy.

Peter Hearn, Chairman of Willis Re, said: "The current reinsurance market clearly favors the buyer. The cost of reinsurance is falling much faster than original rates in many classes and territories. Comfortable though this situation may be for many buyers, the nagging concern remains as to timing. When will a lower cost of reinsurance feed through in lower original rates and put primary companies' margins back under pressure?"

Other points covered in the report include:

  • In addition to the primary reinsurance market, the retrocession market has been the key area of activity for ILS and collateralized markets
  • Capital markets investors are now entering non-catastrophe markets, usually closely aligned to traditional reinsurers with technical underwriting skills
  • U.S. nationwide property rates down by up to 20% on non-loss affected lines
  • Indian property rates down by up to 20% on non-loss affected lines
  • Japan Earthquake down by up to 17.5% on non-loss affected lines

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.

About Willis

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 18,000 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.

CONTACT: Media: Richard Mackillican + 44 2031 246 450 Richard.Mackillican@willis.com Investors: Peter Poillon + 1 212 915 8084 Peter.Poillon@willis.comSource:Willis Group Holdings