Q3 2016 pricing update

A quarterly review of reinsurance pricing metrics

The third quarter is a slow month for trading reinsurance and, by itself, the thin data is inconclusive about which way the market is heading. But many participants think that the market is on course for continued, gradual rate decreases when the bulk of transactions are completed on January 1. Last month, rating agencies Fitch and S&P both said that they expected low single digit rate declines in 2017. Equity analysts at firms including Morgan Stanley and KBW are predicting similar moves.

The ILW market saw material 'live cat' trading in early October due to Hurricane Matthew but the storm caused less damage than feared and is unlikely to have a major impact on pricing.

This chart from Lane Financial indicates that the expected yield of new cat bonds is now at a record low of less than 2%.Screen Shot 2016-10-19 at 6.50.56 PM

This chart from RMS looks at secondary pricing and finds that yields are lower than at the same time in the previous three years.

Screen Shot 2016-10-19 at 7.00.20 PM

The Guy Carpenter ILW index shows a slight uptick for US wind exposed business. The interactive chart is available here.

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Posted: Monday, October 24th, 2016