After two years of price decreases averaging 15 percent on US property catastrophe placements, Guy Carpenter & Company has confirmed that risk-adjusted pricing moderated at the most recent June renewals.
Price declines moderated to decreases averaging in the high single digits, with the range around the average dependent on companies’ individual renewal characteristics.
This was due to a combination of factors, according to Guy Carpenter, including pricing pressure created by past seasons of price declines and a significant amount of new limit placed.
“Many reinsurers held the line against more extreme declines even though capacity was still plentiful and low loss experience continued,” said Lara Mowery, global head of property specialty at Guy Carpenter.
“We have seen some firming in the industry loss warranties market with demand increasing. Also, while mid-year has not been a core date for retrocession renewals, there has been a significant amount of activity in this marketplace as buyers sought to offset their catastrophe exposures.”
The high volume of maturities coupled with a diverse and steady stream of new issuances created a “dynamic” catastrophe bond market in Q1 2015, according to Guy Carpenter.
There was $1.49 billion of property and casualty 144A catastrophe bond limit successfully placed with investors, the most Q1 volume in history.
The highest quarterly volume of property and casualty 144A catastrophe bonds matured in Q1, returning $3.54 billion of principal to investors. Through 1 June 2015, issuance stood at $3.62 billion.
As of 1 June 2015, $21.83 billion of property and casualty 144A catastrophe bond risk capital was outstanding.
Investors’ pricing discipline that emerged in Q4 2014 persisted into Q1 2015, as recent deal pricing and investor feedback suggested that further catastrophe bond pricing reductions in the near-term would be unlikely. Data suggests the market has currently reached a stabilisation point.
Seasonal outlook providers expect 2015 basin counts to fall below the long-term mean of 1955-2014.
The expected counts also fall clearly below the short-term 1995-2014 mean.
Guy Carpenter said: “So while this indeed may be a quiet year, the northern Gulf and northern Caribbean remain areas to watch closely.”
