Reinsurance Pricing

[Guest JoelS]

From today's insurance insider note:

 

"for this week’s issue, we decided to shine the spotlight on reinsurance pricing in an effort to establish just how soft the markets have become.

 

Very, is the unequivocal answer. The downwards trajectory of rates in the core US property catastrophe market was already strongly in evidence last year, but multiple underwriting and broking sources canvassed by The Insurance Insider confirm that the pace of decline has spread and accelerated sharply since then.

 

As one wholesale broking executive put it: "The market has gone into a serious downward spiral and it's not going to get any better anytime soon."

 

The causes of this decline are of course well understood. Rising reinsurer profits, helped by mild catastrophe losses last year, together with a steady influx of pension fund money into the burgeoning insurance-linked securities market, have fuelled a huge build-up of industry capital that is encouraging an old-fashioned price war between reinsurers, both traditional and alternative.

 

What is perhaps surprising, however, is how readily some carriers now appear to be ditching their commitment to price discipline.

 

Indeed, one of the senior executives we spoke to compared current market conditions to those in the late 1980s, when underwriters were preoccupied with “securing business volume almost regardless of underwriting integrity or contract terms.”

 

Did anyone ask the question re exposure to US reinsurance risk at the Fairfax AGM?

[obtuse_investor]

A similar question was asked of Markel management during Q1 2014 conference call. They admitted that the market is soft, but they didn't resort to hyperbole.

 

It is still available at https://www.markelcorp.com/ and transcript is available too at http://seekingalpha.com/article/2205213-markels-mkl-q1-2014-results-earnings-call-transcript