Reinsurers to raise prices as capital becomes scarce: Report

http://www.businessinsurance.com/cgi-bin/news.pl?newsId=14902

Reinsurers to raise prices as capital becomes scarce: Report >

Posted On: Jan. 05, 2009 4:15 AM CST >

Michael Bradford

LONDON—Reinsurers will raise prices during current renewals as they find access to new capital more difficult and expensive in 2009, a report from Willis Re concludes. >

The London-based brokerage unit of Willis Group Holdings Ltd. said in its quarterly reinsurance market report, “1st View,” that reinsurers will make meaningful price increases in capital-intensive lines of business such as catastrophe business in the United States. >

“The unprecedented turmoil in global capital markets during the second half of 2008 has ravaged the balance sheets of many financial institutions,” said Peter Hearn, chief executive officer of Willis Re, in a statement. “Reinsurers, while not currently impaired, have recognized that in the current financial market climate, obtaining new post-event capital will be both difficult and expensive. As a result, reinsurers are seeking to optimize returns on existing capital bases via constrained risk appetites and elevated risk charges,” he said. >

The report also found that primary insurers, who also face capital pressures, are in
creasing their demand for reinsurance as they explore buy-downs and other reinsurance mechanisms. >

The report is available here
http://www.willis.com/Documents/Publications/Industries/Reinsurance/Willis_Re_1st_View_1_January_2009.pdf

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This posting was made my Jim Jacobs, President & CEO of Jacobs Executive Advisors. Jim also serves as Leader of Jacobs Advisors' Insurance Practice.