Willis Re: 2017 will be a challenging year for reinsurers
Despite a 50% increase in insured losses from natural catastrophes during 2016, the global reinsurance industry achieved profitable results for the third quarter. Barring any last minute disasters, 2016 remains on track to close out another profitable full year, reads the recent Willis Re report on the 1st January renewal season, "Struggling to Stabilize".
Reinsurers, eager for more widespread rating stabilization, have had their hopes dashed yet again, thanks to profitable results allied with continued capital oversupply from both traditional reinsurers and capital markets, says Willis, also empasizing that while there are signs that reinsurers are not prepared to be as flexible as in earlier years, many buyers have yet again managed to achieve improved terms. Sizeable reductions have been obtained on international business.
One of the main trends mentioned by the study is the greater market granularity, "due to a greater fragmentation of market pricing by territory, class and specifically, by client," as a result of the reinsurers' stronger client-centric approach.
On the other hand, as John Cavanagh, Global CEO Willis Re has stressed out in his introductory remarks, "while reinsurers are still able to report profitable results despite the underlying issues they face, the situation for many primary companies is tougher." He explained that as many markets have become more competitive, in part because of the emerging new style competitors utilizing innovative low cost distribution and cost models, the pressure on prices has affected the combined ratios. "InsurTech is rapidly emerging from theory into practical application, leaving many primary companies to ponder how to respond, whilesome of their peers are forging ahead, embracing the opportunities InsurTech offers. Among the most committed supporters of disruptive InsurTech solutions are capital markets and some reinsurers who are seeking access to original risk."
Overall, 2017 looks like remaining a demanding year, "where luck will play an even larger role in determining their final results. At the same time, buyers can anticipate that the period of time where reinsurers (reluctantly) accommodate their requests will be extended."
The full Willis Re report is available here.