With the July 1 reinsurance renewal season just completed, the verdict is that reinsurers weren't as tough on prices as many expected.
That's good news for Australia's general insurers, which were seeking to renew policies worth hundreds of millions of dollars in terms of catastrophe and other protections.
With so many calamity hitting the insurance industry in 2010-11 - recall the earthquakes in New Zealand and Japan, and floods in Queensland - the fear was that reinsurance rates might easily soar 50 per cent for some categories.
Instead, the regional small players that don't have big loss exposures are believed to have paid between 15 per cent and 20 per cent for their renewals. The big players, though, got stung to the tune of about 25 per cent, and some a little higher.
An increase in reinsurance rates is generally passed on to the customer of general insurers. For Australians, the more favourable outcome means the cost of general insurance won't rise as much as originally expected.
While it is hard to tell from the overall increase as there are lots of markets involved and they all get different prices, the talk is that retention rates remained pretty much the same as the last policy period.Reinsurance costs have been blamed as a critical component of the hikes in strata and other classes of general insurance in North Queensland. The NDIR proposal for strata and flood was based on a reinsurance scheme supported by the Commonwealth. It's not clear what the implications may be for any further premium increases but an interesting aspect was the report of additional capital in the reinsurance market:
The Guy Carpenter Global Reinsurance Composite index found that reinsurers' capital position increased to $US184.5 billion, a 4 per cent gain over the previous year.“The inflow of new reinsurance capital has also been a significant feature, with between $6 billion and $8 billion of alternative capital entering the market since the catastrophes of 2011,” the report states.Additional capital in reinsurance markets should at least be a positive for market competition, or at least one would think?