Encouraging signs were given in 1 April renewals reports
1 April renewals saw the continuation of an upward trend for reinsurance, while cat bonds continued to decline – though there has been a shoring up on both fronts.
Aon Benfield reported a “modest upward trend” for reinsurance in Q1 of 2017, “as buyers increasingly recognize the value of the product in a world of proliferating risk-based capital regimes.”
Against a continued backdrop of soft market conditions, Willis Re reported that cat bonds have suffered due to investors wanting more liquidity. The firm also highlighted that reinsurers could “draw comfort” from the positive impact changing market conditions would have.
Willis Re global chief executive John Cavanagh said: “As reinsurers look to the rest of this year they can draw comfort that in many cases the reductions are slowing and unbridled competition is abating as the managers face the buffers of tighter regulation, better pricing analytics and transparent shareholder expectations.”
According to Aon Benfield, reinsurance capital rose by 4% from $493bn in 2015 to $514bn in 2016; with ample capacity available, soft market conditions will continue to persist.
Willis Re’s Cavanagh believes that in the face of these conditions, reinsurers are turning to excess capital to shareholders.
He said: “It is clear that in the face of a soft market offering a limited number of acceptably priced opportunities, many reinsurers remain prepared to let their top line revenue growth stall and are opting to return excess capital to their shareholders.”