REINSURERS are trying to stay confident about pricing prospects for 2011 in the face of a chorus of industry observers predicting price and earnings pain.
At their annual Mediterranean meeting, the world’s biggest reinsurance players have once again vowed to maintain discipline in setting prices on the contracts for risk cover they provide to insurers, saying they won’t engage in a competitive race to the bottom.
Munich Re, the world’s biggest reinsurer, predicted it would maintain stable prices overall on its portfolio of business to be renewed at the start of the year, and said some prices were even rising following the sinking of an oil rig in the Gulf of Mexico and earthquake in Chile this year.
French reinsurer Scor also struck an upbeat tone, even as it acknowledged that clients were driving hard bargains.
“We hope by January we can show renewals that are at least stable or slightly up,” Scor chief executive Denis Kessler said.
But brokers, credit rating agencies and other industry observers, attending the Monte Carlo meeting in force, say 2011 is shaping up to be the third year in a row that property and casualty premiums will fall.
Insurance companies, who pay reinsurers to take on their risks of big claims such as for hurricanes or earthquakes, are being flexible about how much reinsurance they are using, buying less of it when it costs more, said James Eck, senior credit officer at Moody’s.
“Insurers don’t expect to pay more and there would be significant resistance to higher prices,” said Eck, adding that most insurers surveyed by Moody’s said they planned to buy the same amount or less reinsurance in 2011 than they did in 2010.
Supply is another issue. There is a lot of excess capital available to reinsurers to write business with insurance clients, following the recovery of capital markets since 2009.
“While excess capital is in the market there is no catalyst to increasing rates,” said Greg Carter of credit ratings agency Fitch.