APRIL RENEWAL SHOWS MARKET IN TRANSITION

Following the most costly first quarter on record for insurers, reinsurance markets are in transition, says Guy Carpenter. In a report the broker said that it is still too early to assess what impact these losses will have on the reinsurance sector, however the reinsurance market was well capitalized at the start of the year – some $19bn above average at $160-$180bn. As a result the Tohoku earthquake and tsunami on their own would not significantly impair the sector's excess capital position. However it follows an estimated $15bn to $20bn in insured losses in the first quarter. "2011 natural catastrophe budgets have already been exhausted and a portion of the sector's excess capital has been absorbed," said Guy Carpenter. "Clearly, any additional large losses incurred in 2011 will put additional strain on reinsurers' capital." The Tohoku earthquake coincided with negotiations for the April 1 reinsurance renewal in Japan, but capacity continued to be made available even for earthquake exposures, albeit with increases of 15%-50%. US rates at the April 1 renewal were flat to up slightly, according to Guy Carpenter, compared with the decrease of 6%-10% at January 1. Windstorms, floods and earthquakes in Australia and New Zealand the past year have led to rate increases there, although the introduction of annual aggregate deductibles and higher retentions helped offset this rise, said Guy Carpenter. David Flandro, Global Head of Business Intelligence, Guy Carpenter & Company: "The implications for June and July reinsurance renewals are unknown at this time. In the short term, we expect to see increased demand for reinsurance cover and share repurchases likely scaled back or suspended until a clearer picture emerges."