The reinsurance sector entered 2013 with ample dedicated capital and stable pricing, according to “The Route to Profitable Growth,” the 2013 global renewal report from Guy Carpenter & Co. Renewals were supported by lower than normal catastrophe losses during the first nine months of 2012, increased reinsurance capacity and record-high levels of capital.
“The January 1, 2013 renewal was very orderly as catastrophes had only local impact,” said Lara Mowery, Global Head of Property Specialty. “One area of ongoing development was growth in the number of participants and capital provided by nontraditional markets, a critical factor in the marketplace's continuing evolution. Even insurers that do not directly utilize nontraditional sources benefit as reinsurers further leverage this capacity.”
The global market has adequate capacity to meet demand, according to the Guy Carpenter Global Property Catastrophe Reinsurance Rate on Line index, which fell slightly at the January 1 renewals. The company said this is the seventh annual renewal in which changes to the index have equaled 10 percent or less.
Upward pressure on property catastrophe pricing was the result of programs affected by Superstorm Sandy and other local events. Programs affected by losses were flat to down. Price movements for noncatastrophe lines were also mixed, with marine and energy lines experienced rate increases, but many other lines experienced reductions.
During the first nine months of 2012, fully-dedicated reinsurance capital increased to $190 billion, a record level; and while Superstorm Sandy caused and estimated $50 billion in losses and likely caused capital levels to stagnate in the fourth quarter, losses were significantly less than the $120 billion sustained in 2011, Guy Carpenter said.
The global economic slowdown continues to negatively affect the global reinsurance market, and Guy Carpenter recommended six key areas carriers can explore to help enhance profitability in 2013 and beyond, including:
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“Over the last five years, insurers have had to respond to financial crises, falling investment yields and increasing international losses,” said David Flandro, Global Head of Business Intelligence, Guy Carpenter. “In this environment, it is imperative that insurance company managements have access to the best solutions and opportunities. Guy Carpenter has a long history of creating value for our clients and we are committed to providing innovative solutions for profitable growth.”
