Despite reinsurers’ results continuing to deteriorate in the first-quarter of 2017, mid-year reinsurance industry renewals saw a continuation of the downward trend seen at January 1st and April 1st, according to Willis Re’s latest 1st view report.
The softening reinsurance market landscape persisted at the mid-year renewals, with buyers taking advantage of favourable terms and pricing, while reinsurers continue to see performance deteriorate with underwriting and investment returns increasingly difficult to come by.
Willis Re said that as seen at the January and April renewals, while the softening has persisted and rates continue to fall, it’s yet to reach an unacceptable level, suggesting more challenging times are ahead, which would be exacerbated by a rise in loss activity and expenses.
“Yet again, we’re in a position where the weakening in the global reinsurance industry’s performance has not reached an unacceptable level. Reinsurers across the board do not yet feel compelled to take a stronger stance over conceding further modest rate reductions and walking away from clients. Much now will depend on loss activity in the traditionally more active third and fourth quarters and on any instability in investment returns,” said John Cavanagh, Global Chief Executive Officer (CEO), Willis Re.
The combined ratio for many classes of business are now looking unattractive, and Willis Re said that the underlying loss and expense ratios for many reinsurance companies are showing “a worrying trend.”
Cavanagh explained that continued reinsurance market softening at mid-year was due to the realisation from the market that “June and July renewal seasons are the last realistic chance for underwriters to meet their 2017 premium targets,” and with competition from traditional and alternative markets high, further softening perhaps isn’t too surprising.
“More localized issues such as the Ogden tables in the U.K., poor results in some specific lines of business and uncertainty over Brexit, are unlikely to generate sufficient impact on a global basis to arrest the current global softening trend,” said Cavanagh.