Reasons to be cheerful

For a start, the insurance market, in general, remains soft, with little sign on any hardening in the immediate future.

The reinsurance market is an important bellwether for the primary market as any signs of hardening-prices increasing, capacity contracting, competition declining-is often first seen there. At the moment, based on the January renewals, not only is there no sign of the market firming up, there are few signs that the rate of softening is even slowing down.

Loads of capacity, rock bottom prices and plenty of competition means great news for buyers.

Having said that, buyers should be aware of a couple of trends: first, a number of the larger insurance companies have increased their reinsurance retentions considerably. In other words, they are taking more of a hit from claims on their own books, perhaps a reflection of the need to improve their margins, a greater appetite for risk, or a determination to control their own business rather than being dictated to by the reinsurance market.

And secondly, there has been a lot of merger and acquisition activity in the reinsurance sector. This may in time reduce competition and possibly make any moves to turn the market easier. But for now, it is good news for buyers, as I’m sure your broker has been telling you.

hide

The other piece of good news is that 2016 is likely to see some progress with the Eciroa and Ferma campaigns over the supervisory treatment of global programmes. That is not to say anything concrete will appear this year, but the stage is set for discussions and negotiation, which is a huge step forward. At least the International Association of Insurance Supervisors is suggesting it is willing to listen, something that it has not been prepared to do until now.