In a sentence: The market has done just about everything necessary to turn, except turn.
A lot about market uncertainty in these reports, which always turns me off. What, after all, is certain? Beyond that, it’s clear that everyone believes a big blow will drive rates up. But there’s not a lot of confidence about what will happen if hurricane season is calm.
Details and links below.
Willis tells us that any turn in the market “is unlikely to follow historic patterns.” But in the face of 16 months with $86B in insured cat losses ($46B to reinsurers), the broker’s data indicate that for reinsurers a hard market is basically here:
- Cat rates higher by double digits.
- Per risk rates generally 5% to 10% higher.
- Casualty rates flat.
- Specialty (engineering, marine, accident, et al.) changes vary by line.
- U.S. workers comp rates stable.
Willis has some nifty charts showing rate levels over long periods, like this one for U.S. catastrophe rates:
Reinsurers have had “three Katrinas” since 2009, constraining capital on the order of $60B (Japan and other cats dating back to the Chilean earthquake; model changes requiring more capital to protect against U.S. hurricane). Even so, rates appear flat at midyear in catastrophe, per risk, clash and casualty markets. Future rate changes will depend on how the U.S. wind season plays out.
Holborn notes that 2010 and 2011 large losses have hit reinsurers harder than the cat heavy years of 2004 and 2005 (though, I’d add, not as big as 2001):
Carpenter spouts the uncertainty line.
- Moderate decline in capital slowing share repurchases.
- Firmer rates on line for property cat at 4/1, 6/1 and 7/1
Losses from recent events are not fully developed and there is not a consensus position on the integration of RMS v11.
GC’s most interesting stuff comes in the cat bond/ILW arena. Channeling GC’s report, Artemis points out that cat bond issuance has dried up in second quarter (after a record Q1). There’s plenty of capital to be had, but not much risk transferring out. And what remains is heavily driven by U.S. wind.
Haven’t seen anything from Aon yet. Probably out today.