Rate reductions are expected to continue for U.S. reinsurance accounts with the midyear renewals unless catastrophe losses increase in the near term, a reinsurance brokerage said.
Guy Carpenter’s comments came in a report on the reinsurance market titled “The Market’s Mixed Signals: Reinsurance Renewals at April 1, 2008.”
The report covers the reinsurance market for the United States, Japan, Republic of Korea and India.
For the United States, the report said rates continued their decline at April 1 renewals, continuing what was seen for Jan. 1.
The report said that looking ahead to midyear renewals, the current trends indicate the declines will continue, assuming losses remain low. However, the report cautioned that if predictions of an above-average hurricane season come true, “the industry’s two-year string of good fortune may come to a close.”
The report said U.S. rate reductions were “substantial” while in the rest of the world there appeared to be less flexibility with rates.
Japan had several issues with catastrophe, fire, windstorm and earthquake placements.
While windstorm cover in Japan experienced softening, reductions could be limited, but “opportunistic purchases” can exploit the soft market.
Fire losses in Japan led to a challenging market, but capacity was sufficient once terms and conditions were settled. Reductions in the catastrophe market were termed modest and other markets seen as stable. Rate reductions generally were no more than 10 percent.
Korea was mixed with property event excess of loss treaties experiencing reductions as high as 20 percent, while property risks ranged from increases up to 40 percent or reductions of 15 percent.
India, which has had little catastrophe activity in 2008, is experiencing catastrophe excess of loss program reductions ranging from 40-to-50 percent, the report said.
“Against the background of a softening reinsurance market in Asia, cedents were generally successful in their push for rate reductions,” Edward Fenton, managing director of Guy Carpenter, said in a statement.
“However, reinsurers were able to differentiate between clients and territories. Where rate levels were judged to be nearer to technical minimums, loss history is poor or capacity is tight, the market exercised greater rate discipline,” he added.