Aon Benfield’s Reinsurance Market Outlook reveals the reinsurance market as an outstanding performer throughout the credit and liquidity crisis without assistance from governments, new capital flows or recapitalizations.
The report, Reinsurance Market Outlook – Resilient Without Assistance, highlights that the reinsurance market stood by their insurer clients and delivered consistent value. Core reinsurance programs globally were able to be renewed in the market at terms and conditions that remained accretive to insurer earnings and capital. Indeed, while rates, terms and conditions held firm globally and increased mildly for U.S. hurricane, a global hard reinsurance market has not occurred as a result of the credit and liquidity crisis.
Instead of shrinking, requiring government assistance and cancelling commitments like other significant financial institutions, reinsurers continued to provide critical coverage and liquidity to cedents. While capital levels decreased mildly as a result of the credit and liquidity crisis, reinsurers generally retained the core economic capital necessary serve their clients.
The Reinsurance Market Outlook, which examines industry trends in 2009 and looks ahead to 2010, forecasts that the reinsurance market will soften globally, bar any significant catastrophic events during the 1 January 2010 renewal season. With both reinsurance buyer and seller capital bases improving, expectations are for an orderly renewal of core reinsurance programs.
Bryon Ehrhart, Chief Executive Officer of Aon Benfield Analytics, said: “Throughout the global financial turmoil, reinsurers consistently provided material and accretive capital to insurers, most of whom were suffering from the affects of the credit and liquidity crisis. While the reinsurance market firmed, it remained functional and in that manner differentiated itself nicely from other markets for insurer capital that had closed or operated at highly dilutive levels. The price increases that occurred were focused squarely on the reinsurers’ peak aggregate risk – U.S. hurricane – and they were mild in comparison to the increases experienced following significant natural catastrophes.”
Andrew Appel, Chief Executive Officer of Aon Benfield, said: “The fact that the reinsurance industry has required no assistance from worldwide governments throughout the worst financial crisis in a generation is testament to the sound risk management practices and conservative investment strategies of its protagonists. As we look ahead to the January 2010 renewals, the industry is in a strong position, and we at Aon Benfield will continue to recognize and address our clients’ needs in what is likely to be a changeable financial environment in the near future.”
