At a time when poor profits and struggling business take over the financial news outlets, Willis Re says that the majority of reinsurers reported relatively positive results, and some underwriting profit, despite poor investment returns in 2008, outperforming the wider financial services community. The reinsurance broking arm of Willis Group Holdings says the reinsurance market stands out as the only capital market operating smoothly, with buyers able to access large quantities of contingent capital.
A report titled Conserving Capital,part of Willis Res 1st View seriesexamines rate movements across numerous territories and product classes and includes detailed analysis from Willis Res product line experts.
There is no doubt that reinsurers are being squeezed by investment performance, deteriorating Hurricane Ike losses and a growing need to increase prior-year casualty reserves, says Peter Hearn, CEO, Willis Re. These pressures are also compounded by the extreme volatility of currency rates of exchange. However, despite these challenges, the increased demand for reinsurance, which started at January 1 renewals, continues strongly to April 1 renewals, and shows no signs of diminishing.
Other key findings of the report include:
Access to fresh capital remains limited mainly to Lloyds, which has outperformed in previous months and has access to a wider range of investors, including capital from private investors
The catastrophe bond market, which stalled following the collapse of Lehman Brothers, has adjusted its product and reopened
Buyers are seeking diversification in their reinsurer counterparties, but capacity and price continue to play key roles in buyer decision-making
In some niche markets, where exposures are particularly challenging, such as Gulf of Mexico, there are signs that some clients are opting to drop cover, but as of January 1, a reasonable balance between affordability and coverage seems to be prevailing in the main
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