Property and casualty reinsurance rates, which fell in seven of the last 10 years, probably won’t rebound in 2014, the head of Allianz SE’s reinsurance arm said.
“Last year’s catastrophe activity was very light — capital from traditional and alternative sources was available in abundance and buyers continued to retain more risk,” Amer Ahmed, chief executive officer of Allianz Re, said in an interview in Munich yesterday. “For 2014, these themes are still going to be there. We’ve shown as an industry the resilience we have to significant losses, so just one big hurricane won’t change the market.”
Reinsurers, which help primary insurers shoulder risks in return for a share of the premiums, saw prices for property catastrophe policies up for renewal on Jan. 1 decline 11 percent amid an oversupply of capital. Prices also fell for most other types of coverage, according to Guy Carpenter, the reinsurance broker of Marsh & McLennan Cos.
Reinsurance rates fell in seven of the last 10 years, according to the Guy Carpenter World Property Catastrophe Rate on Line Index.
“I’m not expecting anything radical for the upcoming renewals throughout the year,” said Ahmed, 46. “There’s less business going into the reinsurance market, and there’s more appetite from both traditional players and newcomers.”
An influx of capital from investors, strong balance sheets and lower-than-average losses from natural disasters meant that supply often outstripped demand in the latest renewals, Guy Carpenter said. The reinsurance industry had about $322 billion in dedicated capital at the end of 2013, almost a record, according to the broker.
Claims Decline
Claims from natural catastrophes fell 52 percent last year to about $31 billion amid a quieter hurricane season, Munich Re, the world’s biggest reinsurer, said on Jan. 7. Claims from hailstorms and floods in Germany topped the list of last year’s most costly insurance losses with companies paying out about 7 billion euros ($9.5 billion).
“What happens in Germany is clearly a significant lever for Allianz Re,” Ahmed said, referring to the unit’s 49 percent business share in Europe’s biggest economy. “Last year was a good test in terms of how well our buying group protection works. I feel we managed these scenarios satisfactorily.” He declined to give more details on the result for 2013.
Allianz Re returned to an operating profit of 404 million euros in 2012 after reporting a 101 million-euro loss for 2011, the year when the record earthquake and tsunami hit Japan. Property and casualty reinsurance contributed 88 percent of Allianz Re’s premium income of 3.9 billion euros in 2012.
Allianz Re, which gets about 80 percent of its business from other units of Allianz, Europe’s biggest insurer, seeks a profit of 300 million euros to 400 million euros in a normal year, Ahmed said, reiterating earlier comments.
–Editors: Steve Bailey, Mark Bentley