Aon Benfield reports level to declining cedant demand; non-peak zone cat losses have no pricing impact.
Aon Benfield has revealed that property catastrophe rates continued the softening trend witnessed at January 1st as the market completes April 1 renewals.
Despite significant reinsurer reports of first quarter income impacts, catastrophe losses from the Chilean earthquake, Windstorm Xynthia in Europe, and other global events, the impact on reinsurer capital is not significant. At December 31, 2009, the industry had returned to near record capital while facing level to declining demand for reinsurance from cedents.
Japan’s catastrophe risks dominate the April renewals period, and the Japanese property catastrophe market saw risk adjusted price reductions of between 0% and 5% with capacity remaining stable. Significant U.S. property catastrophe renewals at April 1, 2010 saw risk adjusted price reductions of -5% to -15%, a range of reductions similar to the levels experienced on January 1, 2010 renewals.
Bryon Ehrhart, Chief Executive Officer of Aon Benfield Analytics, said: “Clients found the April 1 renewal market met their expectations of a continued global softening. Reinsurance capacity, even after considering the first quarter losses in non-peak zones, continues to exceed insurer demand for reinsurance. The reinsured losses in the first quarter likely drive reinsurer consolidations more than reinsurer pricing strength in coming renewals.”
In the UK, property catastrophe reinsurance rates continued to decline during the first quarter of 2010, with the majority of programs seeing comparable reductions to the January renewals period and excess capacity still evident – particularly at the top end of programs.
Meanwhile, the Q1 retrocession renewals period saw a reduction in buyer appetite and an increase of supply, as reinsurance markets sought to capitalize on the healthy rates seen in this line of business.
Mr Ehrhart continued: “Our outlook for the forthcoming June and July 2010 renewals remains aligned with our forecast at January 1, 2010. Rate increases taken in 2009 are largely reversing in 2010 and markets that held firm in 2009 are returning to a mild softening phase.”