The word coming from a reinsurance conference is that a major catastrophe is needed to thin out what is considered to be an overcrowded marketplace.
This is according to industry analyst Taoufik Gharib of Standard & Poor’s Rating Services, who has overheard in his conversations with executives of some Bermuda reinsurance companies that many are looking for a ‘big one’ to reverse the ongoing trend of falling reinsurance prices.
“Some people are looking for a ‘big one’,” said Gharib in an interview with Bermuda’s The Royal Gazette. “It would harden the market and differentiate between winners and losers. Right now it seems like it’s a crowded market.”
Reinsurance rates have been tumbling in recent times, driven by a lack of catastrophes and an influx of third-party capital — and Gharib expects to see them continue to fall.
A major catastrophe would expose those with lower underwriting standards, notably those who have priced risk too cheaply in the pursuit of market share, he added.
Gharib is S&P’s rating agency’s director, financial services ratings, North American insurance, covering the Bermuda market, and is one of the participants in the Bermuda Reinsurance 2014 conference.
Gharib told the Gazette that he expects to see rate reductions of five to 10 per cent at January 1 renewals next year — particularly in property catastrophe business — based on his conversations with industry participants.
Pricing is one of the key points S&P looks at when evaluating the health of the industry, and the trend of decreasing prices was a major factor in the agency’s decision to give the reinsurance industry a negative rating outlook for 2014 back in January of this year.
