Reinsurance Prices Likely To Remain Flat
Persistently weak reinsurance prices which have weighed down the sector’s share prices — triggering consolidation among Bermudian and UK reinsurers this year — are likely to continue into 2012, the Reuter news agency reported yesterday [Oct. 24].
Reinsurance prices look set to remain flat when European insurers renew their policies in January as record catastrophe claims this year have failed to eliminate excess capacity in the industry, reinsurers and brokers say.
Prices will likely stabilise overall after several years of declines, with big increases limited to regions affected by major natural disasters, said Ludger Arnoldussen, a board member at Munich Re, the world’s leading 1 reinsurer.
“We are seeing a general stabilisation in prices, coupled with hardening markets in a number of segments,” Mr. Arnoldussen said in a statement as reinsurers and brokers began policy renewal talks in the German spa town of Baden Baden.
A record $70 billion in claims this year from disasters including the March 11 Japanese earthquake has failed to generate a hoped-for rebound in prices because reinsurers still hold excess capital, encouraging them to compete aggressively, analysts have previously said.
A surge in claims typically supports reinsurance prices by forcing less well-capitalised players to retrench, freeing those still in the market to charge more.
Price reaction this year has been muted because the industry has yet to suffer a “galvanising” loss which fundamentally challenges its perception of risk, said Tom Bolt, Performance Management Director at the Lloyd’s of London insurance market.
“The problem with this year’s losses is while they’re awful to the people involved and fairly dramatic in economic terms, they weren’t outside what people expected we could pay,” Mr. Bolt told Reuters.
