Reinsurance pricing fell in many segments at the January 1 renewals according to Guy Carpenter's new report, "Shaping the Future, Positive Results, Excess Capital & Diversification".
The reinsurance broker said that the price falls affected nearly all lines of business and geographies. It said that a major factor driving market conditions was the low number of natural catastrophes in 2014 – valued at about $30bn – which was the lowest total for four years and 25% less than the benign 2013.
The GC prop-cat ROL Index was down 11% year on year at the January 1 renewals. Guy Carpenter said that "renewals continued to be characterised by lower rates, excess capacity and broader terms and conditions".
Guy Carpenter said that third party capital was also a driver, continuing to flow into the reinsurance market, with institutional investors seeking higher yields.
"As convergence capital has expanded, utilisation within catastrophe products grew to 18% of total catastrophe limit, or $60bn, up from 15% at year-end 2013".
Lara Mowery, Global Head of Property Specialty at Guy Carpenter, said that "market conditions that continue to bring downward pressure on pricing are being met with tremendous, client-focused innovation", adding that "the result has been a customised approach with expanded product offerings and terms and conditions that benefit our clients".
Guy Carpenter vice-chairman David Priebe said that “the sustained influx of capital from new entrants and growth from traditional sources continues to reshape the reinsurance landscape’s capital structure and drive innovation in the form of insurance-linked securities (ILS) and collateralised aggregate solutions."
Priebe said that Guy Carpenter was also witnessing reinsurers "execute strategic decisions through the utilisation of third-party capital facilities and M&A activity in response to new market realities". He said that this was further blurring the lines between "alternative" and "traditional" markets.