Willis Re has issued a 17-page report on the 1st January 2012 renewals which is available by clicking here.

Entitled “Change is in the Wind” the report states that following the second worst catastrophe year for the market on record, with insured losses in excess of US$100bn and reinsured losses over US$50bn:-

- the impact on pricing has been fragmented with loss affected lines and regions seeing obvious strengthening "but with greater differentiation by client and portfolio reflecting both individual results and exposures";

- non-correlated lines remain sluggish owing to capital levels in the global reinsurance industry being only marginally down from the start of the year;

- reinsurers are attempting to reduce the volatility of their non-US books by cutting back exposure in some areas of the Asia-pacific and also to learn the lessons from the Thai floods and impose event limits in quota share renewals or tightening up on the scope of cover for Contingent Business Interruption losses.

James Vickers, Willis Re Chairman of International Business says in the Willis Re news release:

“After a bruising year of natural catastrophe losses, many outside the traditional key catastrophe zones, reinsurers have largely reacted as anticipated with differentiated rating approaches driven by individual client and territory results. With the exception of a few problem long tail classes reinsurers have concentrated on increasing prices for natural catastrophe exposed covers which is leading to wide pricing differences by class.”

Hampden comment: The impact of 2011 calendar year's catastrophe losses (dominated by the Asia-Pacific region this year) has been to reduce earnings but not capital levels as a whole. Consequently, according to this report, property catastrophe reinsurers are attempting selective re-pricing of catastrophe renewals in loss-making programmes rather than forging a blanket "hard market".