According to broker Willis, increased capacity, competition and changing market dynamics have created a buyer's market for European cedants. Loss free rates could be 5-10 per cent lower at the 1 January, 2014 renewals, predicts the broker. "With large parts of Europe so far experiencing another year of exceptionally low natural peril loss activity, reinsurers are facing significant rating pressure on catastrophe programmes in loss-free territories on the back of the excellent 2012 and 2013 results", said Tony Melia, CEO of Willis Re International.
On the flip side, reinsurers are reviewing their view of risk on loss-affected programmes to determine the pricing level at renewal, Willis said. But loss-affected programmes should receive only modest adjustments, benefiting from the current soft market conditions, said Mr Melia in a statement this week.
Munich Re expects prices for its own portfolio to remain largely stable. The high claims burden in Germany will, however, play a major role in the renewal discussions, it said during the meeting at the German spa town in the Black Forest.
The reinsurer also expects the losses to stimulate increased demand for reinsurance in Germany as its clients seek to extend coverage layers. Losses will make some German cedants consider buying more frequency protection or more layers of reinsurance to address severity, according to Frank Reichelt, Market Executive Germany and Nordics at Swiss Re.
Large multinational insurers are centralising their reinsurance buying and looking to increase retentions following several years of good results and stronger capital positions, said Mr Reichelt. Large multinational insurers are also looking more at alternative capital solutions such as catastrophe bonds, he added.
Discussions at the Monte Carlo Reinsurance Rendez-Vous in September were dominated by talk of the impact of third party capital, mostly from pension and hedge funds that increasingly play in the cat bond and collateralised reinsurance market as they seek better investment returns than those available in standard markets.
Europe's much-delayed new capital regime, Solvency II, is a factor that has yet to affect reinsurance purchasing. Most companies are waiting for final rules and regulations to be released before reviewing their reinsurance structures, said Mr Reichelt. Most non-life insurers in Germany and the Nordic region have strong balance sheets, although some may seek to buy additional catastrophe reinsurance in light of Solvency II, he added.
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