Many property and casualty CFOs agree with what large brokers, analysts and industry observers have been saying: alternative capital is holding down reinsurance rates, contributing to a market that is softer than the primary market.
In Towers Watson's sixth North American P&C CFO Survey, which included 29 CFO participants, 55% of respondents say the property reinsurance market is softer than the primary market, while 34% say the same is true for casualty business. The CFOs cited "the significant growth of insurance-linked securities and other alternative forms of reinsurance capital" as a primary reason, Towers Watson says.
Regarding the impact the softer reinsurance market could have on the primary commercial market, which has already seen some moderation in rate increases, Stuart Hayes, senior consultant, Towers Watson, says, "As reinsurance costs are a component of primary insurance prices, declining prices in the reinsurance market as a result of the influx of alternative capital could potentially contribute to a softening of the primary market."
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