Analysts at Morgan Stanley have predicted further, albeit slower, reinsurance rate declines at mid-year as market headwinds persist. However, the firm does highlight an opportunity for insurers and reinsurers created by the flurry of merger and acquisition (M&A) activity witnessed in 2015.
The global reinsurance industry remains under significant pressure, and despite 2015 benefiting from a continuation of benign cat losses and reserve releases, Morgan Stanley highlights that market pressures will persist and earnings will likely continue to diminish.
Pricing in the global reinsurance market continued to fall at the key January renewals, and analysts expect more of the same at mid-year. Declines are expected to be at a slower rate than at last year’s June and July renewal though, with market sources suggesting an expectation of single digit declines across the market, with differences by line and region.
Our sources suggest that casualty and specialty lines of reinsurance will be the areas to look to for the steepest rate declines at the mid-year 2016 renewals, with property and catastrophe lines likely to see a little less pressure, as markets seek to hold up rates which they feel are already approaching technical levels.