Reinsurers have had a better start to 2012 than of late, with fewer losses and a gradual improvement in the rating environment reported in the first quarter, according to Willis Re.
However, lower loss activity in both the US and International markets, and a gradual improvement in rating levels seen in the primary market, have been overshadowed by reinsurers’ disappointing results in 2011, it adds.
The Willis Re 1st View report, entitled Measured Response, found that despite the market showing signs of positive development, most reinsurers remain hesitant to increase their portfolios, preferring to focus on managing underwriting volatility and conserving capital whilst waiting for signs of further improvement.
The report notes that some primary buyers are reluctant to manage increased reinsurance costs through reduction in purchases and are restructuring their programmes to maintain retention levels. This trend is not being seen in the larger US primary companies, who are seeing a continuing increase in their property cat retentions.
“Reinsurers remain focused. They are taking a highly segmented and increasingly disciplined approach to terms and conditions and are not seeking to apply blanket rate increases. In turn, this is leading to wider variations in rate movement by territory and class”, said Peter Hearn, Chairman of Willis Re.
“Fortunately for its customers, the global reinsurance industry is largely reacting in a measured and logical fashion. Falling investment income, allied with increased loss trends on long-tail business, still remain key to a broad and more defined future market hardening in the absence of a major catastrophic loss”, said Mr Hearn.
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