Reinsurance rates continued to fall by up to 20% across the board at the April 1 renewals, brokers Willis Re have revealed in a new study.
According to the reinsurance brokers 1st View renewals report, trends observed during the January 1 2014 renewals continued and showed signs of acceleration in property, casualty, and aerospace reinsurance.
Positive 2013 results for traditional reinsurers and an unrelenting supply of capital from third party investors have added further to the supply of reinsurance capacity 'chasing muted demand', said the firm.
Willis Re chair Peter Hearn, said: 'The current reinsurance market clearly favours the buyer. The cost of reinsurance is falling much faster than original rates in many classes and territories. Comfortable though this situation may be for many buyers, the nagging concern remains as to timing.
'When will a lower cost of reinsurance feed through in lower original rates and put primary companies' margins back under pressure?'
Willis Re's study also found that many primary insurance company buyers - international and regional US companies - continued to remain cautious in their use of insurance-linked securities (ILS) and collateralised markets.
The study identified that these reinsurers stepped up efforts to manage their capital through increased share buy backs, special dividend and other techniques.
The April 1 renewals have seen a 'softening' of rates across nearly all classes and countries, like India, Korea, Japan and the US, which, in turn, has allowed buyers to achieve substantial savings in the cost of their reinsurance protections, added Willis Re chief executive John Cavanagh.
He said some buyers took the opportunity to buy more cover and some renewals saw an expansion in terms and conditions.
'The overriding target for most buyers, however, was to achieve price reductions or an increase in ceding commissions,' Cavanagh continued.
'Restructuring and consolidation of covers by some of the larger buyers continues to be a trend along with M&A consolidation causing further compression in price in favour of the buyer.'
