Reinsurance Demand Idle Despite Rate Decreases

Increased insurer capital and low insured catastrophe losses to date have resulted in stable demand year over year from insurers despite continued rate decreases in many global segments in recent major renewals. Insurer capital grew by 6 percent through Q2 now totaling approximately USD4.2 trillion globally.

Along with rate reductions, cedents in various global regions have seen improvements in terms and conditions for 2014 reinsurance placements including improved reinstatement provisions, expanded hours clause, and broadened terrorism coverage.

Although overall demand remained relatively flat year over year, some cedents looked to secure new forms of capacity including reinstatement protection placements and aggregate protection or elected to use a portion of the savings from rate reductions to purchase to a higher level of protection. In many cases, some or all of this coverage was provided by capital markets capacity.
Rate changes in all segments saw smaller decreases than have been experienced in the market since 2011. In fact, commercial property actually declined in pricing by 2.0 percent compared to renewals in the prior first and second quarter. As experienced from 2011 to 2013, workers’ compensation continued to see the strongest increases, albeit at 3.6 percent for renewals in 2014 to date. The indices for all lines of business still remain below 2007 levels with the exception of workers’ compensation that fairs slightly more favorably to date in 2014 at 1.33 compared to 1.29.