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Market Report: Reinsurance Deluge

Traditional reinsurers have begun to take robust defensive measures as an influx of about $50 billion in new capital, including more than $35 billion from nontraditional sources, has entered the market.

By Michael P. Voelker | Updated on August 01, 2013
The biggest news in the reinsurance marketplace over the past 12 months has been the influx of an estimated $50 billion in new capital, including more than $35 billion from nontraditional sources such as hedge funds and pension funds. As a result, traditional reinsurers have begun to take “robust defensive measures,” says Willis Re.

Despite the $30 billion impact of Superstorm Sandy, Willis Re says in its current “1st View” market report that reinsurers are offering price reductions in nearly all global territories. Property rates for catastrophe loss-free are down 20 percent across the U.S., including a 25 percent drop in hurricane-prone Florida. Reinsurers are broadening coverage through multi-year agreements, extended-hours clauses and additional reinstatements.

Brokers and buyers are understandably cheering the impact of the capital infusion. “For brokers who spend their life thinking about how they can service their clients better, it’s fantastic,” says Bryon Ehrhart, chairman of Aon Benfield Analytics and of Aon Benfield’s Investment Banking group. “We’ve been challenged to find low-cost catastrophe capacity since Hurricane Andrew.”

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