Category Archives: Reinsurance

Reinsurance Rate Erosion Continues – For Now

Despite significant catastrophe losses during the first half of 2010, including the Chilean earthquake, reinsurance rates continued to decline at the July 1, 2010Â  reinsurance renewal, according to a newly released report from Guy Carpenter.

The report found that U.S. property rates decreased by as much as 15 percent, with pricing for the year down 12 percent. Meanwhile, across the energy and casualty sectors, conditions were flat or down, though the Deepwater Horizon rig disaster has the potential to put upward pressure on rates.

Predictions of an active hurricane season have had only a slight impact on June and July renewals, with quoting behavior firmer than expected, but if the forecasts are right, there is a greater chance the marketplace will look very different at the January 1, 2011 renewal, Guy Carpenter said.

It went on to explain that while the Deepwater Horizon loss is potentially a market-changing event, it is geared principally towards energy and liability exposures. Reinsurers will be hard-pressed to justify rate increases for clients writing traditional marine  cargo/hull accounts, it suggested.

Reinsurers’ quotes on international placements were unaffected by the Deepwater Horizon loss, as accounts were underwritten separately based on specific account losses and exposures.

However, marine excess of loss pricing is expected to increase substantially for reinsurance buyers with energy exposures. Increases of greater than 10 percent were seen for deepwater drilling risks similar to those of the Deepwater Horizon, Guy Carpenter said.

Check out I.I.I. background  information on reinsurance.

Chile Quake: Latin America’s Most Costly Insured Loss?

The Chile earthquake could outpace Hurricane Wilma as the most costly insured event in Latin America’s history, according to a recent posting at insurereinsure.com (the insurance and reinsurance blog of Edwards Angell Palmer & Dodge). Quoting commentary from reinsurance broker Cooper Gay it notes that even if insured losses fall in the mid-range of current estimates of between $2 billion and $8 billion, the earthquake likely will overtake Hurricane Wilma in 2005 as the most expensive insured event ever to hit Latin America. Insurereinsure.com goes on to note that some compliance and coverage issues have also begun to emerge from Chile as the investigation of losses progresses. International insurers and reinsurers continue to announce preliminary loss estimates following the quake. Global Reinsurance also quotes Cooper Gay analysis comparing the Chile quake to Hurricane Wilma. While Wilma was very specific to the Cancun region in Mexico, largely affecting coastal, hospitality-related properties, the Chile earthquake covers a much wider area (900 sq miles) and has destroyed a much broader spectrum of property. Cooper Gay also notes that up to 75 percent of the Chile quake was reinsured, but whether it’s a market-changing event will depend on whether losses creep up toward the top end of the insured loss estimates. The comments underscore the point that  insurance dollars will go a long way to help rebuild and defray the economic cost of the  quake. Check out the I.I.I. International Fact Book for information on the Chile insurance market.