Following recent catastrophe loss estimates of around $136 billion, 2017 is set to be one of the worst loss years on record for the global reinsurance market, according to the latest 1st View renewals report from Willis Re.
The report suggested that last year’s catastrophe losses are coinciding at a time when profitability in non-catastrophe lines is constrained and prior-year reserve releases are slowing.
However, pricing corrections have not seen a significant spike due to the combination of strong reinsurance market capitalisation, losses being split over multiple events and the fact that a large tranche of the losses were retained in the primary market.
It also found that the global reinsurance industry was significantly different for buyers in 2017, compared to previous years with large catastrophe events.
The current market saw traditional reinsurers remaining strongly regulated and capitalised supplemented by insurance-linked securities (ILS) capacity, which has grown to $75 billion.
Willis Re also reported that catastrophe losses have stopped a further negative movement in risk-adjusted rates in most markets and classes, while the maintained supply of capital has helped diminish widespread increases in risk-adjusted rates on loss-free portfolios.
The report also found average adjusted increases of 0 to 7.5 percent for pricing across global property catastrophe and risk programmes, with a few outliers either side of the range.
Additionally, merger and acquisition transaction volume last year finished on a par with 2016’s $49 billion.
It also showed that ILS investors have replenished their capital and continue to trade forward with modest spread increases for loss affected perils.
The report also highlighted the evolving danger posed by cyber threats as a major concern for 2018.
James Kent, global CEO of Willis Re, said: “No commentary on the January 1 renewal season can overlook the scale of human suffering and economic loss that the catastrophes in H2 2017 have caused.”
He continued: “As society as a whole is starting to look more closely at the role the global reinsurance market can play in helping to close the economic loss gap, the stability of the market bodes well for its future development.”