The April 1 renewals were notable for continued "significant" price reductions and more tailored reinsurance cover, claims Guy Carpenter in its first analysis of the mainly Asia-based reinsurance renewals of April 1.
"Strong balance sheets, an abundance of capacity and a consolidation of buying led to lower reinsurance pricing across most territories and business segments at the renewal", Guy Carpenter said. Asia-Pacific Operations chief executive James Nash noted that, although there had been a spike in losses in Q1 2014 as a result of severe storms and floods in some parts of the region, the continued excess capacity and increased supply of alternative capital sources continued to affect the pricing of reinsurance in both Asia and the small number of treaties renewed on April 1 in the US.
Looking at specific geographies, in Japan the degree of rate decreases was generally greater than expected, with Japanese buyers benefiting from "sizeable price and cost reductions in most main lines of business, with supply often exceeding demand.
This change hit both sides of the balance sheet, with an excess of supply on the reinsurer side (exacerbated by a depreciating Japanese yen) being compounded by reduced demand on the primary side. This was a result of mergers, corporate restructuring, and a combination of perils in catastrophe covers, Guy Carpenter said.
In South Korea the property excess of loss programmes were impacted by three big risk losses in the past year. "Adjustments were consequently made to the deductibles of Korean non-marine treaties", said Guy Carpenter, while also noting that "there was sufficient capacity to place business".
The broker also noted that reinsurers' interest in Korean casualty excess of loss lines was strong at April 1 renewals "due to their strong historical performance". However, that past performance brought increased competition because of new participants in the space.
In India, one of the major contributors to the April renewal space, the several natural catastrophes it suffered in 2013 had little impact on the market, with most being low to non-existent on reinsurance impact. The bulk of protection continued to be placed on a traditional excess of loss basis, where traditional capital still dominates, but alternative capacity providers "continued to impact the market by offering capacity with flexible terms and conditions at reduced pricing".