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Sept. 14 (Bloomberg) -- Reinsurance prices will fall and weakening terms and conditions will move into more classes next year as the industry fights “over the same pie,” reinsurers and brokers gathering at their annual meeting in Monte Carlo said.
An absence of costly disasters and increasing competition from new entrants dragged on prices this year as reinsurers struggled to halt the slide, industry officials said before starting talks with brokers and clients this week over next year’s property-and-casualty policies.
“Because of another year of low catastrophe losses we will see another difficult renewal season,” John Cavanagh, Chief Executive Officer of reinsurance broker Willis Re, said at a press briefing in Monte Carlo today. “Overwhelmingly, we continue to fight over the same pie.”
Prices dropped this year during each of the policy renewal periods in January, April and July as the industry faced rising competition and narrowing underwriting margins and record capital available for coverage weighed on prices.
Rates for property and casualty reinsurance are still being squeezed and talks for the January renewals are dominated by “extremely low interest rates for investments,” Munich Re, the world’s biggest reinsurer, said at a briefing. Years where losses for reinsurers were relatively low are also adding pressure on prices now, the company said.
One solution might be to move into new areas of business and sell cover for new risks, as there is “plenty of stuff to insure,” Alex Moczarski, CEO of reinsurance broker Guy Carpenter said at a briefing on Sept. 13.
If it is just a matter of “business as usual” for reinsurer, then the market will continue to be challenging, Moczarski said.“If reinsurers do same things as they are doing now, I would assume that, short of a huge catastrophe, the market will remain soft.”
“We think what is happening now is more of a structural change nature, not cyclical,” said James Vickers, Willis Re International chairman.
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