Annual reinsurance renewals on January 1 took place against a backdrop of stable pricing and ample dedicated reinsurance capital, Guy Carpenter said today.
In The route to profitable growth, the reinsurance broker noted that only loss-affected lines of reinsurance business and specific regions saw price volatility. Overall, its 'Global property reinsurance rate on line index' fell marginally at the renewals, which indicates a global market with the right capacity to meet demand, it explained.
This is the seventh consecutive annual renewal where the index has changed by 10% or less. 'Over this period the reinsurance market has responded well to financial crises, increasing international losses and numerous Atlantic Basin and European wind events,' the report said.
Any upward pressure on property catastrophe pricing for the 2013 renewal generally came as a result of the impact of Superstorm Sandy in the US and other smaller, local events. In non-catastrophe lines, marine and energy business generally saw noticeable rate increases while many others experienced reduction.
Guy Carpenter noted that, while Sandy has pushed global insured losses to more than $50bn in 2012 and was likely to have caused capital levels to stagnate in the fourth quarter of the year, losses were still significantly less than the $120bn seen in 2011. Fully dedicated reinsurance capital had risen to over $190bn at the end of the third quarter, it added.
Lara Mowery, global head of property speciality at the broker, said: 'The January 1, 2013 renewal was very orderly as catastrophes had only local impact. One area of ongoing development was growth in the number of participants and capital provided by non-traditional markets, a critical factor in the marketplace's continuing evolution.
'Even insurers who do not directly utilise non-traditional sources benefit as reinsurers further leverage this capacity,' she added.
The report noted, however, that the reinsurance sector faced continuing challenges from the macroeconomic environment, with pressure from low economic growth worldwide.
There is also evidence that reserves are continuing to diminish and reinsurers will not be able to use them boost their earnings for much longer.
'All of these developments mean that underwriting performance, adaptability and capital management are now manifestly at the centre of any profitable growth strategy,' it added.