Reinsurance rates had started to dip last year and it seems the trend will continue . In recent months, the dip has been clearly visible, across the nation, with more insurance companies employing better, refined models.

The Current Trending, Explained

Insurance agents were expecting this trend to continue. The reasons have been somewhat palpable for those who maintain a curious look into the industry. Firstly, 2013 was a rather silent year in terms of natural disasters and catastrophes causing loss to properties. With fewer claims, economics improved for the bigger carriers. With more capital at their disposal, they see lesser reasons for selling reinsurance products.

Alternative capital resources are now more accessible. More investments are being routed towards collateralized reinsurance. Due to this, the role of a conventional agent and typical reinsurance firms has taken a beating. However, it would be premature to say that the business has been suffering. Most industry experts agree that by and large, last year was exceptionally good for their underwriting teams.

Casualty Reinsurance Rising?

There is little clarity about how many and what types of natural disasters are lined up for 2014. Despite research, scientific forecasting data doesn’t prove 100 percent accurate. If the trend sustains for a longer duration, the pressure on reinsurance firms’ capital will be even lesser. This means companies could rethink their share buyback policies. It might lead to more dividends. For the more dexterous insurers, this phase offers opportunities to re-evaluate traditional outcasts in the market, i.e. consumer segments clearly labeled as unfit for business. Perhaps, this is the reason why some early indicators suggest that there is an increased, recent interest in casualty reinsurance.

Entering Unexplored Territories

ILS or insurance linked securities are being discussed more seriously. As the market gravitates towards the casualty niche, traditionally guarded carriers calculate their chances, attracted by better premium volumes while the margins remain limited on property damage due to catastrophes.

Agents can expect a lot of noise as more carriers explore better products, more coverage options, and better pricing in this segment. This can be understood as branching out of the conventional property reinsurance market—something not known to many agents until now. Some re-insurers are even looking at international markets.

For the industry, these changes present a big step away from the norm. Earlier, the reinsurance industry opted to remain guarded about the casualty liability insurance, understanding that creating new, more workable, bigger margin models is very difficult. Carriers are now ready to recalculate their exposure and look at the possibility of creating more business channels. Until a few months ago, it was almost insane to say that big insurers can consider overseas opportunities!

Don’t Overdo the Enthusiasm

The only area of concern remains the need for big investments for these norm-defying business decisions. Typical agent training might not be sufficient as carriers enter zones that have remained outside their sphere of specialization. Handling alternative capital means that the re-insurer is burdened with a significant amount of risk.

Getting Sensitized to Climate Changes or Just Speculation?

Some industry discussions have ventured to the extent of saying that more volatile business decisions could be influenced by global warming trends. Though this isn’t talked about enough, insurers and re-insurers are already trying to gauge the expanse of climate change induced catastrophic patterns. Sometimes, this helps to gain a bigger understanding of remedial measures that can restrict damages caused by natural disasters like floods.

We are not trying to deviate the discussion towards the criticality of rising ocean temperatures and melting glaciers, but weather patterns are a definite cause for more reinsurance. The industry remains almost tight lipped about acknowledging this, not wanting to set undue alarms in a still-recovering market.

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