Reinsurance prices expected to be flat at year-end renewals: Rendez-vous meeting

MONTE CARLO, Monaco — Reinsurance prices largely will be flat at year-end renewals, barring any major catastrophes, according to reinsurers, brokers and other experts meeting in Monte Carlo, Monaco, this week.

While reinsurance capacity remains plentiful, the continued influence of 2011 catastrophe losses on the market and low interest rates dampening investment income likely will stifle attempts by cedents to significantly lower reinsurance rates, experts say.

And demand for reinsurance may increase next year as insurers in Europe prepare for increased capital requirements under the Solvency II regulatory regime, they say.

Reinsurers, brokers and other market participants are meeting in Monte Carlo for the annual Rendez-vous de Septembre reinsurance meeting, which marks the traditional start of year-end renewal negotiations.

Rate hikes moderating

Reinsurance rates for contracts renewing throughout 2011 have seen increases, but rate hikes have been moderating as the year progresses, said Ulrich Wallin, CEO of Hannover Reinsurance Co.

“Provided that there's no significant loss between now and year-end, we expect further moderation,” he said. Rates likely will vary depending on classes of business, but U.S. catastrophe reinsurance “should see increases of around 5%,” Mr. Wallin said.

But some U.S. catastrophe programs could see modest decreases in rates, said David Priebe, vice chairman of Guy Carpenter & Co.

“U.S. property cat rates represent the most attractive pieces of business in the world … the market feels that the margins in that area are attractive,” he said.

Non-catastrophe programs, such as aggregate excess of loss programs, may still see some increases, depending on the individual risks, Mr. Priebe said. “But there is good dialogue between cedents and capital providers on developing program structures and pricing that makes sense.”