Strong results in 2013 fuelled a soft buyers’ market, with prices softening in nearly all lines of business and rates down up to 25% according to Willis Re

Strong results in 2013 among other factors fuelled a soft buyers’ market at the 1 January 2014 renewals, according to the first View Renewals Report from Willis Re.

The report states that soft market conditions are no longer unique to property catastrophe business, with rates down on most lines at 1 January 2014.

Pricing margins on excess of loss business have been compressed and ceding commissions have increased on pro rata treaties for sought-after clients with large ceded premium volumes.

Other key findings within the report include:

  • 2013’s underwriting performance is not reflective of strong market conditions, but rather from a paucity of natural and man-made catastrophes: 2013 natural catastrophes were half of what was experienced in 2012
  • US property catastrophe loss-free reductions of 10-25%
  • European property catastrophe loss-free reductions of 10-15%
  • M&A activity is picking up going into 2014: larger companies are looking to manufacture growth through M&A and strategically challenged companies are beginning to accept that being acquired may be the best option for their shareholders, particularly those backed by venture capital funds.

Speaking to StrategicRISK, Willis Re International chairman James Vickers said: “The overall margin compression across the whole market and probably the most widespread rate softening seen since the late 1990s has made this year unique.

“Unlike the late 1990s, however, there is still a margin and reinsurers have declined to support what their own rating models show as loss-making business.”

He added: “The impact of the capital markets in terms of business written is still very largely restricted to US cat and retro business, but a considerable ripple effect is being felt through the wider market as traditional reinsurers allocate capital away from US cat and retro to other classes.”

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