NUMIS SAYS THAT PROPERTY CATASTROPHE MARGINS WILL NARROW

An influx of cheaper insurance-linked securities and increasing levels of capital market capacity will lead to softening rates in the property catastrophe sector, according to Numis Securities. Numis analyst Nick Johnson said that the June renewals had seen price falls in the region of 15% on average, reaching 30% on some Florida prop-cat lines. "We think the search for yield by investors will drive ongoing growth in the ILS space and put further pressure on property CAT rates and volumes in the traditional reinsurance sector into 2014", he wrote, while noting that some players such as Lancashire, Amlin and Hiscox were developing their own fund management types of insurance business – a different model that could in time be of benefit to shareholders. With traditional reinsurance price discipline slipping, Mr Johnson said that, barring a major event, prices could fall back to the levels seen before Hurricane Katrina in 2005. He predicted an average 7% drop in earnings per share across the London market underwriters covered.