Rates fall more slowly

chute5 (2)Data from brokers shows that property reinsurance rates have continued to fall in 2016 but more slowly than in previous years.

At the key January renewal season reinsurance, retrocession and industry loss warranties experienced rate reductions in all major territories. The secondary cat bond market is experiencing slightly improved risk-adjusted yields. 

The Guy Carpenter Global Property Catastrophe Rate on Line Index fell by close to 9% over 12 months (compared to 11% in the two previous years) and is now at the lowest level since 2000. The broker found that the US market experienced smaller reductions than other regions. Users who have registered (for free) can see the regional curves here

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Other brokers recorded similar reductions in property reinsurance. Willis found risk-adjusted rate reductions of 2.5% to 7.5% in the US and reductions of 5% to 12.5% on loss-free European programmes.

This chart shows the rates for US ILWs (also from Guy Carpenter). ILW rates experienced a surge in the middle of 2015 but lost all these gains and more to finish the year about 5% lower than 12 months earlier. The makeup of buyers and sellers has remained largely stable in the ILW space and limits bound are comparable with the same period last year. Users who have registered (for free) can see US hurricane and earthquake pricing here.

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The expected returns for new catastrophe bonds were flat in 2015 relative to 2014. This chart from RMS indicates that risk adjusted rates in the secondary market showed a slight improvement compared to twelve months earlier. Registered users can click here to view the performance of hurricane and earthquake bonds.

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Posted: Monday, January 18th, 2016