Rates decline continues
01 Jun 2017
Rates in the global insurance and reinsurance markets continue to decline according to reports from Marsh and JLT. The insurance rate decrease has moderated however this is not seen in reinsurance.
Global insurance rates have decreased for 16 consecutive quarters - but the decreases have moderated for five straight quarters. This was revealed by major brokerage Marsh’s Global Insurance Market Index, a proprietary measure of global commercial renewal rates.
The index encompasses the world’s major insurance markets.
According to the report, global insurance rate decreases have moderated for the fifth consecutive quarter, with a dip of 2.3%, compared to the previous quarter’s 3.1% decrease.
The quarter also saw a global moderation of decreases in property & casualty, financial, and professional lines. Global casualty rate decreases moderated for a three-quarter streak at 0.6%, mostly because of the first increase in US casualty renewal rates since the third quarter of 2014.
Global property rates decreased by an average of 3.6% for 1Q 2017, compared to a 4.2% decline in 4Q 2016, while financial and professional lines saw a decrease of 2.6%, compared to 3.0% in the previous quarter.
Dean Klisura, global industry specialties and placement leader at Marsh, commented on the developments, saying: “The first quarter of 2017 was the sixteenth consecutive quarter in which average renewal rates declined. This trend continues to be driven by a marketplace with significant capacity and a competitive underwriting environment.”
A reinsurance market awash in abundant capacity saw rate declines continue at June 1 renewals, JLT Re, the reinsurance arm of Jardine Lloyd Thompson Group P.L.C., said Thursday.
The rate of those reductions accelerated, according to the company, whose Risk-Adjusted Florida Property-Catastrophe ROL Index fell by 5.1% this year, more than last year’s 3.1% decrease (within a range of zero to negative 10%).
“Excess capacity and strong competition amongst traditional and insurance-linked securities markets … were once again instrumental in driving rates down,” JLT Re said in a statement, adding that ILS markets showed “renewed vigor” in trying to deploy capital and increase their participation.
These most recent market declines bring pricing of Florida business down 40% from 2012 levels and only 10% above previous market cycle lows seen in 1999 and 2000, according to JLT.
In the retrocession markets, plentiful capacity combined with a lack of significant losses to drive down rates for retrocession placements by mid-single digit levels generally, JLT Re said, bringing market conditions to their most competitive level since the late 1990s and early 2000s.
Retrocession demand, meanwhile, remained strong as cedents, taking advantage of market conditions, lowered retentions and added additional layers of coverage at June 1 renewals.
The supply-side imbalance proved the main market force at the renewals. “Excess sector capital continues to drive the market,” David Flandro, New York-based global head of analytics for JLT Re, said in the statement. “Surplus capacity is enabling cedents to negotiate discounts to expiring reinsurance rates,” although June 1 renewals were also affected by cedent performance and size, he added.
- Insurance Business / Business Insurance