Disaster Reinsurance Prices “Better than Expected”
At an industry conference held in Berlin on Monday, PartnerRe CEO Patrick Thiele announced that U.S. catastrophe reinsurance prices held up better than had been expected during critical contract renewal discussions. The renewal discussions were held in May and June, when many insurers with exposures in the hurricane-prone southeastern United States renew their annual risk covers with their reinsurers.
In the aftermath of 2005 hurricanes Katrina, Rita and Wilma, which cost the insurance and reinsurance industries over $60 billion, the cost of reinsurance cover skyrocketed for U.S. catastrophe-exposed risks. Yet the lack of any major hurricanes lin 2006, the influx of new reinsurers—some backed by hedge funds attracted by the high returns on offer—and Florida's move to offer insurers billions of dollars of inexpensive reinsurance led to a subsequent dip in prices.
A report released earlier this month by Willis Group Holdings Ltd. said U.S. insurers with catastrophe exposures saw price cuts of as much as 20%.
"There was a lot of concern that the actions of the Florida Legislature and the influx of considerable capital into the market would lead to a significant softening in prices," Mr. Thiele said.
But "the prices we were able to achieve on business were quite adequate" to reach PartnerRe's long-term profit goals, he said. Mr. Thiele said earlier this year that although prices were falling, lower claims meant the expected profitability of the company's business would exceed its targets.
Published on July 10, 2007
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