Updates

2005 Reinsurance Renewal Season Report

A report on the 1st of January 2006 reinsurance renewals by JCC Re's Chief Executive, Jeremy Camps.

"Early expectations were for a much harder reinsurance market following Hurricane Katrina (estimated cost US$50 Billion) and two other smaller but still significant loss events.  The impact of the Asian/Indian/Sri Lankan Tsunami which occurred at the end of 2004 had except in a small number of cases been forgotten or overlooked.

At the Bade-Baden Reinsurance Conference in October which I attended there was talk of a 10% increase in rates for loss free European Excess of Loss and a toughened attitude from reinsurers.

Whether as a result of the many billion of new capital (replacing lost capital) attracted by potential increased returns on Catastrophe business, in the end most rates in Europe remained unchanged except in case of loss.  Asia Can often be different but usually the reinsurers attempt to recoup part of their overall loss in other areas.  Perhaps better defined as them taking advantage of their poor results to seek contributions from other clients.

This was very much the situation expected of Asia on treaties and excess of loss at the time of the Singapore conference in September.  Facultative property rates had been going down all year by up to 30% and only energy business which had been badly effected by Katrina had hardened.

On treaties and excess of loss the leaders attempted to maintain the status quo but under pressure from the emergence of a new and competitive leader as well as some other potential leaders the existing leading reinsurers had to react to protect their business.  This led to major competition and whilst capacity was not increased in the same way as in previous years (fueling the direct market competition) underwriting restrictions were modified or reduced and terms generally improved.

This had led us to the conclusion that in spite of everything the reinsurance market is softening.  As a result of the rates being reduced whilst the claims frequency and amount has not.  The results of the market are bound to worsen.

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