Renewals Are Late, but Premiums are Mostly Stable, Says Aon Re UK

Aon Re UK has issued an a bulletin following a renewals briefing in London yesterday, Jan.12, indicating that although the January reinsurance renewal season is running very late, premiums (rates) aren’t appreciably higher, except in areas affected by the U.S. hurricanes.

“Following a year of unprecedented natural catastrophe losses, the 2005/6 reinsurance renewals season completed later than ever before with some programs still not finished by their renewal date,” Aon said. It added, “although this was one of the most difficult renewal seasons experienced, buyers were seeing high rate increases only for areas affected by US wind exposed risks.”

Aon also noted that the “reinsurance industry has proved to be remarkably resilient following 2005’s unprecedented series of losses, with substantial new capital having been raised to meet increased demand.”

Despite the new capacity, Aon expressed confidence that “reinsurer discipline” in 2006 “will remain constant and rating levels applied throughout the renewal season will be maintained, and may even firm slightly as Reinsurers reach the limit of their aggregate capacity in peak zones.”

Commenting on the recent renewal season, Charlie Cantlay, deputy chairman of Aon Re UK, stated: “It is very much a market characterized by a great divide between business with US wind exposure and risk elsewhere. Bullish predictions of ‘across the board’ rate increases on all lines of reinsurance in respect of product or domicile, have not materialized and major rate rises have been limited to US property, marine and energy and retrocessional business.”

Cantlay also pointed out that the “state of the reinsurance industry, at the time of the hurricane losses, was fundamentally more robust than the conditions that existed at the time of the 9/11 tragedy and this, together with replenishment and new capital, is the major reason why increases have been so narrowly focused.”