WIL­LIS RE: NEW CAP­I­TAL IS A THREAT TO REIN­SUR­ERS

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AC­CORD­ING to Wil­lis Re, many tra­di­tional rein­sur­ers see the flow of cap­i­tal com­ing into the rein­sur­ance mar­ket as a di­rect threat to their ex­ist­ing port­fo­lios. The Wil­lis Re 1st View April Re­newals Re­port, en­ti­tled “Cap­i­tal Over­flow,” notes there is cur­rently around US$35 bil­lion (MYR106.41 bil­lion) of cap­i­tal that has en­tered the rein­sur­ance mar­ket from a va­ri­ety of sources. The vol­ume of cap­i­tal en­ter­ing the mar­ket is also in­creas­ing. This in­flux of new cap­i­tal could also have a sig­nif­i­cant im­pact on the post-event re­sponse from the global rein­sur­ance mar­ket. His­tor­i­cally, fol­low­ing a ma­jor loss, new rein­sur­ance com­pa­nies have been formed through the cre­ation of per­ma­nent cap­i­tal struc­tures, whereas to­day new cap­i­tal flows into the mar­ket, in a more fun­gi­ble man­ner. The re­port also notes that over­all global rein­sur­ance pre­mium vol­ume is be­ing squeezed by a com­bi­na­tion of M&A ac­tiv­ity and higher re­ten­tions by larger in­sur­ers. Other ar­eas of con­cern for rein­sur­ers in­clude: Slug­gish growth in ma­ture mar­kets is not yet be­ing off­set by growth in emerg­ing mar­kets Changes in pri­mary mar­ket dis­tri­bu­tion mod­els are ef­fec­tively con­cen­trat­ing pre­mium into the hands of fewer larger rein­sur­ers

Ac­cess to risk to drive growth as­pi­ra­tions

Other points of note in­clude: Over­all pric­ing is flat to slightly down on loss-free lines of busi­ness Ma­jor Ja­panese rein­sur­ance buy­ers have rec­og­nized the sup­port they ob­tained from their rein­sur­ers over the dif­fi­cult re­newals of 2011 and 2012. As a re­sult, they have been rewarded with sig­nif­i­cant lev­els of ad­di­tional ca­pac­ity. Pric­ing was ei­ther risk-ad­justed flat or down across all lines Early in­di­ca­tions of the 1 June 2013 Florida mar­ket

re­newals in­di­cates more ag­gres­sive pric­ing

US$1.00 = MYR3.04

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