Global natural catastrophe losses in 2012 were about half of what they were in 2011, resulting in no major reinsurance rate increases during the January 2013 renewal season, according to a report by the reinsurance arm of the global broker Willis Group Holdings.
The Willis 1st View report, Reinsurers Clear the Sandy Hurdle, found that international rates for risk-adjusted property catastrophe business averaged between flat and a 5% decrease. Risk-adjusted U.S. rates for property catastrophe were between flat and a 5% decrease for free accounts, and a 10% increase on loss impaired accounts.
Reinsurance losses were generally within reinsurers’ budgets and were not anticipated to have any capital affect, the Willis reports states.
“In the absence of Superstorm Sandy, reinsurers would have found it difficult to resist buyer pressure for further concessions,” Willis Re chairman and Willis Re CEO John Cavanagh comment in the report. “As such, Sandy’s impact has helped to stabilize market pricing on an overall basis and reinsurers have largely delivered to their clients in terms of capacity and continuity.”
Willis estimates that natural catastrophe losses for 2012 were roughly half of last year’s losses of $120 billion. Damage caused by Hurricane Sandy in the United States and Canada is currently estimated to have caused between $20 billion and $25 billion, roughly 40% of global natural catastrophe damage losses.
The report highlights that 2012 has been particularly difficult for the marine market, “which has suffered one of its worst underwriting years in recent history.”
Already suffering from the Costa Concordia sinking and the deterioration of the Rena loss from 2011, Superstorm Sandy was widely expected to be the largest ever marine loss with a disproportionate impact on the marine market, Willis reported.
Large losses came from yachts and pleasure craft, general cargo, imported cars, specie and inland marine. The P&I market is seeing minimum of 10% increases, with international group reinsurance program seeing a 40% increase, Willis said. “P&I Clubs are passing on increased reinsurance costs via original general Increases in the range of +7.5% to +10%.”