Stability dominates Italian renewals say big brokers

Commercial insurance buyers can therefore look forward to a relatively stress-free year as they negotiate with their main carriers enabling them to focus on wider risks.

But, despite high capacity level overall, there are worrying signs of rising losses and a tougher stance from reinsurers in some areas that could signal the start of the market turn in Italy perhaps earlier than elsewhere in Europe.

Aon Benfield said that in general, exposure adjusted reinsurance pricing remains stable in Italy and this reflects the fact that contract terms have ‘virtually bottomed out’ in many cases in recent years.

The broker noted that the lack of significant catastrophe losses in 2010 meant that renewals are ‘largely proceeding at unchanged terms on a comparable basis.’

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Aon said that underlying direct rates remain ‘stagnant’ and in some cases are decreasing.

As elsewhere in Europe, the exception is motor liability because negative results in the past two years have led to increased tariffs. “In some instances this has had a bearing on the relevant excess of loss reinsurance pricing,” stated the broker.

Aon Benfield said that some Italian ceding companies have shown a greater awareness of Solvency II requirements and the impact on their reinsurance needs; while others have ‘minimally adjusted’ their programmes to fulfil the requirements.

“Some reinsurers have also been more rigid in their underwriting approach, a fact which might be attributed to their own Solvency II considerations,” it stated.

Guy Carpenter said that loss-free Italian programmes were down 5–10%. Those affected by losses experienced average increases of 10% it added.

Willis Re reported that in property lines Italian companies are moving from standalone fire and motor own damage covers to combined property covers against the background of Solvency II. It said it noted a ‘key focus on aggregate covers for excess of frequency to stabilise performance.’

Overall it said that Italian reinsurance buyers can enjoy plenty of catastrophe capacity available and strong competition.

The broker said that exposures for the biggest programmes increased ‘substantially’. Reinsurance budget remains an ‘issue’ and retentions increased, according to Willis Re.

The broker said that property reinsurance buyers nonetheless sought to protect net retentions through sub-layers and/or aggregate covers.

“Risk is still very competitive, but less appealing to reinsurers than catastrophe, especially for London and Bermuda markets,” it added.

In casualty, Willis Re said that there is a more disciplined underwriting focus for Italian general and professional liability reinsurance risks.

It said that reinsurers were particularly more selective in their underwriting of medical malpractice risks but added that some new companies are already entering the market because of the attractive terms.

“On pro rata Medical Malpractice, reinsurers are preferring to support direct companies with strong underwriting expertise and claims management efficiency,” added the broker.

Willis Re observed slight tension in XL programmes because of increased bodily injury claims on the basis of new indemnification tables.

Willis agreed with Aon that more upwards movement is evident in the motor market.

This is because underwriters are worried about the new indemnification tables for bodily injury losses and original tariffs are increasing by 10–15% year on year, it said. This would bring the current 2011 expected combined ratio below 100%, added Willis Re.

The broker added that excess of loss programme structures are ‘basically unchanged’ but noted uncertainty about indemnifications and the impact of EC directives that could create a ‘wide range’ of pricing.

According to Willis Re existing pro rata treaties generated ‘substantial losses’ to reinsurers in the last two to three years and a hardening of terms has been seen.