Reinsurance treaty renewals show some premium increases

With the January renewal season now behind them, the world’s global reinsurers are collectively breathing a small sigh of relief. While premium increases in the U.S. met or exceeded expectations, especially along the stricken Gulf Coast, there were few, if any, increases in other parts of the world, notably in Europe.

Swiss Re posted a 7 percent improvement in economic profit and premium growth to $7.1 billion. Munich Re said its reinsurance treaty renewal premium volume in January was around $10.57 billion.

A.M. Best issued a statement acknowledging that the “significant losses from Katrina, Wilma and Rita incurred by reinsurers have only helped to halt temporarily the downward trend in the underwriting cycle prior to these events.”

A shift in emphasis also helped boost premiums. Swiss Re said it had seen growth in property and specialty lines of around 6 percent while liability and motor lines were cut back by 10 percent. While its premium volume for European treaty business remained unchanged, Swiss Re noted a 13 percent decline in the U.S. “due to reductions in liability business.” This was balanced by “solid growth of 23 percent in Asia, predominantly in the emerging markets.”

Munich Re said the average increase may have been around 3 percent, however some regions, notably those hit by the 2005 hurricanes, paid a lot more for reinsurance in the “high two-digit figures” on average. The highest increases were in offshore energy, with up to 400 percent in some cases.

Best confirmed that most of the significant price increases were limited to business lines affected by the U.S. hurricanes. It indicated that European treaty business, which accounts for approximately two thirds of the renewals, saw relatively stable premium rates. Best expects a return of competition, provided that “underwriting results in 2006 turn out to be favorable.”

Topics Trends USA Europe Pricing Trends Reinsurance